SOS September Blue

Is it a myth or a reality? Neither, it is just statistics.

We called it September blue.

SOS Chia Yiu, Go China Go

Well, they say Shanghai Stock Market is crowded, crowded as per small market per capita. The recent rise from index 1800 to 3500, and not down back to 2900. Andy Xie, ex Morgan Stanley believe the bubble will burst.

MyView

Yep, it is going to burst, go for FXP, short Chinese market.

SOS Derivatives!

Hello? Hello? Hello.........

Everyone seems so indulge with the share markets over the last 6 months that they have forgotten the "weapon of mass destruction" or WMD in short. The last I recall, it is about USD600 trillion in notional value. Well US and UK formed maybe more than 50 per cent of the said total.

Have we forgotten, structure investment vehichles, collateralised debt obligation, collateralised loan obligations, credit default swap, mortgage debt securities, accelerator, etc.

MyView

How can the quantitative easing solve this WMD. I have doubt anyone can stop it. Well, the only outcome is "financial tsunami or financial collapse" in the next few years as the world will enter into deflationary depression and follow by hyperinflationary depression with high unemploykment. Can the expert economists or analysts out there cover this subject in more details and enlighten the mass?

To be continue............

SOS UVW or VWU?

Would it be:

Deflate, inflate, stagflate, reflate?

Would the world economy be:

VWU, V, U, W, L or VWUL? Take a look at Japan for reference.

Based on historical data, all ponzi scheme will end up in bust, no matter how they do it. It is a matter of time. Look at Bernie.

SOS Elliot Wave!

In the long run i.e. 5-10 years, USD dollar will be trash paper. In the long run, over consumption and over dept will cause indigestion, and will definitely implosion in debt and higher savings

Not only property market will collapse, there will be collapes in other markets like shares markets, bond markets, and of course ultimately US dollar currency.

Well, in mid August this is what Robert Prechter, based on Elliot Wave reading said,

Stocks will collapse

US dollar will rise

Commodities will collapse

Property will collapse

US is not in recession, it is in depression, long drawn recessions with high unemployment.

MyView

Don't believe what I says, believe what he said. One of the most accurate market forecaster who takes into account not only the fundamentals, but also the non tangible psycology of the crowd and other social moods. He had been accurate and continue to be accurate since 2000.

Take this guy seriously.

SOS Boom or Bust

Andy Xie in his latest article wrote about Boom or Bust, he says Bust. The stimulus has distorted the real underlying of the economics.

Roubini says W shape and a long U recovery. Actual deleveraging is far from over since the government has socialised all the losses via it stimulus and bailouts

Robert Prechter says, we are not out of the woods yet.

The Ponzi scheme in the fractional system has comes to the end. Investment bank gears up to 1 to 50 times debt. The financial institution will continue to deleverage a lot faster than the government's printing machine. Due to this factor, banks or financial institutions are not able to provide new credit until the existing debt are being settled or restructured. The amount of credit in the system will shrink so fast so much that it will cause lack of credit in the system, causing deflation. Yet the printing of money will eventually cause hyperinflation in a later stage after the deleveraging plays its effects.

Meaning, mosts assets class will goes down, stocks, commodities, gold, real properties, "empty boxes or derivatives" Only when deveraging has fully take its effect, which may take a few years, and growth to resume after that, then inflation will creep in so fast that the US dollar will collapse in the end.

Meanwhile, once the liquidity is dry up, in a couple of months, the scene will shock the bullish investors once again. This second round, there will not be any more mercy, all major stock markets will bust.

MyView

Drastic deflation will take place first, until deleveraging has runs its course, then hyperinflation will sets in.

SOS Up

What goes up, will come down, what is left, nothing's right.

It's is an interesting movie indeed. The moral of the story is, we live in a deluded world. Your hero may turn out to be the villian. Just like Warren Buffett. When we think he has high moral and virtues, but in reality, he is only human, he choose to gain from others' pain in the recent bailouts. He is the prime beneficiary in the bailouts, no wonder he said, Ben Bernanke is the smartest guy on earth, which personally I find it distasteful.

Well, this is live is all about. Living in delusion. The more one is deluded, the harder one have to face reality when it comes right smacking in their face, and they may not able to accept reality.

The illustration above tells us a story that when we detach ourselves too much from reality, we will be in for a shock of our lives. Could you emagine 5 months ago in March 2009 and the emotion now in August 2009. Have they forgotten that the world economy is grapping for air? And now only 5 months down the road, they are celebrating. Well, we can understand that if we were wrongly told that we have 6 months to live, but the reality is, our illnesses are far from over, a few morphin injection may sooth the pain, but it does not remove the fundamental problem. Hence, investor should be very careful, another bubble is in the making. Rather than risking for the remaining 20% gain than exposure to the 80% of the bubble being poked.

SOS Stocks & Property Bubble in China!

The stock market is in a final frenzy again. The most ignorant retail investors are being sucked in by the rising momentum. They again dream of getting rich overnight. As in the past, retail investors usually lose, especially like the ones jumping in now. The final frenzy usually doesn’t last. The turning points in China are often related to political calendar. Retail investors hold the popular belief that the government won’t let the market drop before October 1, the 60th anniversary of the PRC. Last time it was the 17th Party Congress in October 2007. This sort of belief is self-fulfilling in the short term. The market tends to roll over around the time. If the past is of meaningful guidance, this wave will taper off before October.

The idea that the government wouldn’t let the market drop is rooted in Chinese market psychology. In financial jargon, it is called a put option. During the Greenspan era, financial markets believed that he would always bail out markets in a crisis, which was the so-called Greenspan put. The belief in China should be called the Panda put. However, in reality, the government couldn’t reverse the market trend when it turns. Chinese stock market has big ups and downs in the past, which shows the government’s inability to stop the market from falling. Nevertheless, this imaginary put option remains deeply rooted in popular psychology.

Many policy thinkers believe that bubbles are not that harmful. One popular theory is that in a bubble money is passed from one person to another and, as long as it remains in China, no permanent harms can be done. Hence, if people are happy now and unhappy tomorrow, they just cancel each other. They should look at Japan and Hong Kong to see how much damage a bubble can do even without leaking money out of a country.

In a bubble resources are diverted to bubble making activities. The resources will be permanently wasted. For example, businessmen in China are reluctant to focus on real economic activities and are devoting time and energy to market speculation. It means that China wouldn’t have many globally competitive companies in the future. Even though China has had three decades of high growth, few companies are globally competitive. The serial bubble making in the Chinese economy may be the reason.

A generation of young people is not interested in real jobs and is addicted to stock market speculation. They see their holdings changing in value in a day more than their monthly salary and have the illusion that they would make a lot of money in the market. Of course, most of them will lose everything and may take extreme actions afterwards. The social consequences could be quite serious.

A property bubble usually leads to overbuilding. The empty buildings represent permanent losses. Most people would laugh at such a possibility in China. After all, 1.3 billion would need unlimited properties. The reality is quite different. China’s urban living space is 28 square meters per person, quite high by international standard. China’s urbanization is about 50%. It could rise to 70-75%. Afterwards the rural population would decline on its own due to its high average age. So China’s urban population may rise by another 300 million people. If we assume they all can afford property (a laughable notion at today’s price), Chinese cities may need an additional 8.4 billion square meters. China’s work-in-progress is over 2 billion square meters. There is enough land out there for another 2. The construction industry has production capacity of about 1.5 billion square meters per annum. Absolute oversupply, i.e., there aren’t enough people for all the buildings, could happen quite soon. When it happens, the consequences are quite severe. Property prices could drop like Japan has experienced in the past two decades, which would destroy the banking system.

The most serious damage that a property bubble inflicts is in changing demographics. High property prices bring down birth rates. When property prices decline after a bubble bursts, the low birth rate culture cannot be changed. Hong Kong, Japan, Korea, and Taiwan all went through property bubbles during their development. Their birth rates dropped during the bubbles and didn’t recover afterwards despite government providing incentives. China’s one-child policy alone will lead to a demographic catastrophe in two decades. The property bubble makes the trend irreversible: when the government abandons the one-child policy, there wouldn’t be meaningful impact on birth rate. Within two decades Chinese population could be very old and declining. Of course, property prices would be very low and declining also.

In addition to net losses the redistribution aspect of a bubble has serious social consequences too. In the stock market bubble most households lose and a few win big. China’s wealth inequality is already very high. The bubbles make it worse. A sizable or even the majority of China’s population may not have meaningful wealth even after China’s urbanization is complete. It will lead to an unstable society. A market economy is stable and efficient when the majority has meaningful wealth and, hence, has a stake in the system.

In summary, the market frenzy now won’t last long. The correction may happen in the fourth quarter. There could be another wave of frenzy next year as China can still release more liquidity. When the dollar recovers, possibly in 2012, China’s property and stock market could experience collapses like during the Asian Financial Crisis.

My View

I like the jargon the economists use, the "panda put" which is similar to the "Greenspan put" where he will bailout the market in crisis. In actual fact, it only make it worst and can hardly reverse the trend. Many experts (Martin Weiss, Harry Dent, Robert Prechter, Gerald Celente, Andy Xie, Joseph Stiglitz, Roubini) points that 2012 will be the worst year for asset markets like property and stocks.

SOS China Boom or Bubble?

http://xieguozhong.blog.sohu.com/

By Andy Xie (ex Morgan Stanley strategist for Asia)

The most basic approach in studying bubbles is to look at valuation. For property the most important measures are price to income ratio and rental yield. China’s average price per square meter nationwide is quite close to the average in the US. The US’s per capita income is seven times China’s urban per capita income. The nationwide average price is about three months of salary per square meter, probably the highest in the world. As far as I can tell, a lot of properties can’t be rented out at all. Those that can bring in 3% yield, barely compensating for depreciation. The average rental yield, if one including those that can’t be rented out, is probably negligible. China’s property price doesn’t make sense from affordability or yield perspective. Some argue that China’s property is always like this: appreciation is the return. This is not true. The property market dropped dramatically from 1995-2001 during a strong dollar period.

A special angle in China’s property bubble is its role in local government finance. As land sales and taxes from property sales account for a big portion of local government revenues, they have powerful incentives to pump up the property market. Land sales are often carefully managed to spike up expectation. For example, those who bid extraordinarily high prices for land are laurelled as land kings. Lately, the land kings are often state-owned enterprises. When state-owned enterprises borrow from state owned band and give the money to local governments at land auctions, why should the prices be meaningful? The money circulates within the big government pocket. Tomorrow’s non-performing loans, if land prices collapse, are just today’s fiscal revenues. If private developers follow the SoEs to chase the skyrocketing land market, they could be committing suicide.

MyView

It is simple logic, as what Andy Xie pointed out clearly above. Of course one will ask, how and when will USD appreciate? I believe, over time of one to two years, i.e. 2010 and 2011. This is due to the deleveraging effects, and weak consumer spendings (due to unemployment) and return to savings by the Americans (as shown lately the swing from negative saving to 2-3% savings).

SOS Crude Oil @ $10

Aug. 13 (Bloomberg) -- Crude oil may plunge to less than $10 a barrel in the next decade after surging to a record $147 last year, said Robert Prechter, who achieved fame for cautioning on Oct. 5, 1987, that stocks would crash.

“I expect crude oil prices to fall below $10 a barrel sometime over the next decade,” Prechter, founder of Elliott Wave International Inc., said in an e-mail yesterday. “It took many years for it to achieve $147.50, and it will take a long while for the full retreat to occur.”

Oil should fall to between $4 and $10 a barrel based on a technical analysis called Elliott Wave principle, Prechter said in the Elliott Wave Theorist report last month. The forecast rests on a “supercycle” theory, which through a series of five waves from last century suggests a decline from last year’s peak.

Crude oil in New York reached a record in July before tumbling to $33.20 on Jan. 15 on expectations the global recession will sap demand for fuels. Oil has since more than doubled to $70.70 a barrel in New York. Brent oil rose to an all-time high of $147.50 on July 11, 2008.
“The Elliott-Wave picture pretty much assures us that there will be no additional waves of advance to extend the ‘peak oil’ mania,” Prechter said in the report. “On the contrary, if five waves are complete from the early 1990s, oil should fall to between $4 and $10 a barrel, which, needless to say, supports our deflationary outlook.”

Commodities may have peaked last year and the next major top may be in the late 2030s, Prechter said in the report, citing wave and cycle analyst Harry Dent, who showed a 29-year cycle in commodities, with past peaks in 1920, 1951, 1980 and 2008.

MyView

This really fits the deflationary depression camps' arguement. So, putting it into action will be shorting crude oil. Say from $66 to $10 per barrel is equal to 67% drop in 10 years, is it worth the risk?

SOS Andy Xie

Andy Xie: “Crazy Again” Aug 5, 2009
Andy Xie, an independent economist in Shanghai, writes in his new article 《又疯狂了》(“Crazy Again”) on his blog:

Chinese stock and property markets have bubbled up again. It was fueled by bank lending and inflation fear. I think that Chinese stocks and properties are 50-100% overvalued. The odds are that both will adjust in the fourth quarter. However, both might flare up again sometime next year. Fluctuating within a long bubble could be the dominant trend for the foreseeable future. The bursting will happen when the US dollar becomes strong again. The catalyst could be serious inflation that forces the Fed to raise interest rate.

Chinese asset markets have become a giant Ponzi scheme. The prices are supported by appreciation expectation. As more people and liquidity are sucked in, the resulting surging prices validate the expectation, which prompts more people to join the party. This sort of bubble ends when there isn’t enough liquidity to feed the beast.

[...] In summary, the market frenzy now won’t last long. The correction may happen in the fourth quarter. There could be another wave of frenzy next year as China can still release more liquidity. When the dollar recovers, possibly in 2012, China’s property and stock market could experience collapses like during the Asian Financial Crisis.

MyView

• liquidity driven asset markets like China will not last;


• appreciation expectation supported asset markets will not last;


• most experts view China as the next economic engine, and as usual, most experts are wrong (this is nothing new) - what is the consequences if we over expect something? We are in for a suprise shock. There is no doubt that some industry in China will strive, but, when the bubble burst, it goes down together. And as long as China continue to pump liquidity into the system, we will have high volatility with a long term bubble in the making;


• too many are looking at the good side of China at the moment, because, comparatively, US and Europe are down, what are market can they go? What about the ugly side of China? Have anyone care to bring it up? Not many. What about property bubble, NPL in banks, overbuilding, exports collapse, outflow of money etc.

In short, as usual, I believe, people are always effected by the social moods that cause the trends, which are not shown by any indicators. Answer this question: In 1970, who would have expect China economy will be the top 3 in the world? The question tells us that not everything can be extrapolated by the history. So does it mean we can short China markets? Yes, why not, it is doing at PEs of high 20s, the low of Shanghai Index in Oct 2008 is about 1500 and peak at early August 2009 of 3500, a total of 133%. On 18 August it has corrected 17% to 2900. Say we use a reasonable PE of low 20, it will be 2300 (3500x20/30), so another 20% to go.

This is what Andy Xie said

Many would argue that China isn’t experiencing a bubble. The high asset prices just reflect China’s high growth potential. One can never make an ironclad case to pin down an asset boom as a bubble. An element of judgment based on experience is inevitable when one calls a market boom a bubble. I have had a reasonably good record at calling bubbles in the past. I wrote my doctoral thesis arguing that Japan was a bubble in late 1980s, a long report at the World Bank in earl 1990s arguing that Southeast Asia was a bubble, research notes at Morgan Stanley in 1999 calling dotcom boom a bubble, and numerous research notes from 2003 onwards arguing that the US property market was a bubble. On the other hand I have never called something a bubble that turned out not to be a bubble.

SOS Robert Prechter said on 15 August 2009

Watch out for what Robert Prechter said on 15 August 2009, interview by Bloomberg:-

His views are as follows:

• US dollar is going to go up;
  


• Stocks all over the world is going to drop significantly;
  


• Commodities price will drop;

He has been quite accurately over the last few years and his explanation is the most logical one vs the other experts like Peter Schiff, Marc Faber & Jim Rogers, who are the proponents of the hyperinflation depression. All of them are right on their own analysis based on the data and facts they used, it is only the timing, timeframe they are investing, risk profile and expectations that makes the different.

Robert Prechter explains about long term trends in various asset classes i.e. stocks, real estates, commodities, gold, currencies and uses Elliot Wave principles to forecast the trends, and so far has been spot on, while

Jim Rogers an investor that spot trends of asset class, and invest for really long term, say 1o to 20 years, hence he is right to say commodities will go up looking at the current fundamentals of commodities required by the China and India.

Although Peter Schiff is very worry about hyperinflation, he may be right, but could be a few year early. His views that in the long run, US dollar and its economy will tank under the burden of dept and printing of money, so he recommend gold, investment in stocks outside US (worry about the collapse) and focus on dividend stocks, commodities stocks in Australia, infratructure stocks in China (railroad, solar energy, beverage is China).

Similarly in the same camp, Marc Faber says the Zimbawae inflation will happen in USA in few years or even 5 to 1o years time and he favour long term investment in gold and other commodities, as well as agricultural and commodities in Asia Pacific but he did warn about China bubble in stocks.

Meanwhile, Andy Xie, ex Morgan Stanley analyst is pretty sure about the stocks and property bubble in China.

MyView

Take Prechter's view seriously but that does not mean you cannot invest in good fundamental stocks/ETFs which are expose to agriculture around the globe, or even water treatment engineering companies all over the world where demand are going to increase over longer runs. Meanwhile, you may want to take advantages of Prechter timing the asset class, which actually differentiate a winner from an average investor.

Remember, each individual has different risk profile, time frame of investment, amount to be invested and competency, but it is not wrong to say there are lots of unpolished diamonds around the world market, the question is, do you want to wait?

SOS Weiss World Forum

13 August 2009

1. Economy moving from East to West



2. Europe economy is worst than USA



3. Europe is 6% to 7% of deficit of GDP, allowed by EU on 3%



4. China is growing, stess tested, and not into bubble in the near future



5. China is deregulating while the west is putting more regulation



6. Russia banks not as bad as Europe, and it will grow based on oil and gas and other commodities to satisfy the appetiet of China



7. USA treasuries issuing USD75 billion in last 3 days



8. China grow is a long long way to go



9. Medium term for Europe, similar to USA, feable recovery



10. China stock market went up 130% since Oct 2008



11. Brazil EWZ (ETF for Brazil) is up 60%, higher than China 40% FXI vs Dow Jones DJI of 3%



12. Stock market lead economy



13. Predict China 8-9% next 12 months


14. Chinese stimulus package goes straight into the economy (central bank), going into infrastructure, right now is 275,000 projects in China


15. Stimulus 14% of China GDP, about 2 trillion in cash, do not need to borrow


16. Reserve is USD2.13 trillion on Q2 of 2009 in China, still is growing

MyView

Everyone seems to putting most of their eggs into China due to many economic reasons. But I believe there are over expectations of China to save the world, there will be in for a shock! What about bubble in China property? What about bubble in share market? Everyone seems to be singing the same song, China will save the world. Everyone is talking about the potential in China about their strong consumptions, car per capita, hunger for raw materials, and infrastructure requirements etc.

Not much said about excess or overprice properties in China.

Not much said about the overvaluation of the stock markets.

Not much said about the strength of the banking system.

Not much said about the loss of exports.

Anyway, all seems to agree the increase in assets recently is due to liquidity.

Well, like what Robert Prechter said, the trends is set by the social mood.f

Ponder over these few questions:

1. It is 1886, project the American railroad industy


2. It is 1970, project the future of China


3. It is 1963, project the cost of medical care in U.S.


4. It is 1969, project the U.S. space program


5. It is 100 A.D., project the future of Roman civilisation

SOS Japan

Japan lost two decades.

SOS Careful about the share market

China banks gave out USD1.1 trillion for the first six months of 2009.

TARP investigation reported, USA has given out about USD12.7 trillion in terms of bailouts, stimulus, guarantee, buying toxic assets.

The quantitative easing in Europe is compatible with the US.

The world quantitative easing have temporarily deluded to the masses when the underlying of the real economy is deteriorating, with the increase in all share markets since March 2009. Yes, that is what exactly we are in, deluded by the media.

MyView

1. the property bubble in US and Europe is far from over;
2. the property bubble in China is just beginning;
3. consumption in US is declining; and
4. China share market bubble is just begining

MyView

It may not be the best time to enter the share market, be it in emerging markets or US or Europe. Be patient. You may get higher return in the next 3-9 months.

SOS Shanghai stock market

This will be the scene in 3 to 9 months from Sept 2009.

SOS sos

“Deflation in everything you own and inflation in everything you use.”

My View

This is the most appropriate term used for the next couple of years to come.

SOS "in" or "de" flation

So: Is it time to pin on those Whip Inflation Now buttons once again? According to many mainstream experts, the answer is YES. They're leading the charge for a "WIN 2" campaign in the United States, and filling the financial airwaves with references to the 1970's oil crisis, wage freezes, and wheelbarrows full of cash.

Their logic is simple: As the U.S. government and Federal Reserve continue their hand-over-fist policy of printing money and forklifting trillions in bailouts to the battered banking sector -- eventually, prices will rise to compensate for the increase in supply.

They're forgetting one important thing: demand. The Fed's helicopters can continue crop-dusting all the currency it wants onto the U.S. economic soil; but prices won't start to "shoot upward" unless people actually spend the currency. Until that happens the "seeds" go dry and wither -- it's a condition known as "deflation."

Look around: the only real inflation is in the amount of talking about it. Since September 2007, the Fed has slashed interest rates ten times, to a record low of .25% to 0%. Combine that with the $12.8 Trillion in bailout money over the same period, and you have the single largest inflation-creating scheme in history. By all accounts, gold prices should be moonbeams above their March 2008 peak -- yet they haven't budged from the upper $800-$900 per ounce range in two years.

On a similar note: commodity values have weakened, the "face" value of many outstanding loans is crashing (See: July 15 Wells Fargo sale of $600 million in distressed subprime loans for $0.35 on the dollar), and the real estate slump continues to intensify -- despite mainstream claims to the contrary.

(Which 'Flation: In, or De? The August 2009 Elliott Wave Financial Forecast reveals that the winds of change have turned in one direction; the time to act is now. Get the complete story today)

Housing: The second most illuminating sector of the economy is NOT signaling inflation. Quite the opposite; here, the following close-up from the August 2009 Elliott Wave Financial Forecast (EWFF) speaks for itself.

As for the foremost indicator of US economic health -- the consumer -- the August Financial Forecast offers this picture of Consumer Debt as a Percentage of Personal Income since 1983.
In EWFF's own words:

"As long as the value of real estate holdings was rising, consumers were willing to expand their debt burden. But psychology has completely reversed. Consumers are trimming their debt exposure at a quickening rate."

SOS The Great RecoVery

Newsweek said "The recession is over"
CNBC said "The Great RecoVery"
Bloomberg said "The Worst is Over"

Well, this may last for a little while. The good old days are back. China had recovered 90%, USA recovered more than 50%, the rest of the world also recovered about 40 to 60%. Thank goodness, the worst is over. Yes, absolutely, if we buy into the numbers that are published lately by the main media.

Hold your breath, what about those who predicted this crisis got to say:-

1. Jim Rogers said it is far from over
2. Peter Schiff said recession may be over, the depression is just beginning
3. Marc Faber said that China can predicts their GDP figures for 3 years in advance
4. Gary Shilling said the recession is yet to end due to consumer savings is increasing and unemployment rate continue to rise cumulatively
5. Robert Prechter said the this is just a bear market rally
6. Max Keiser said the real economy underneath the figures are far more worst than you think
7. Joseph Stiglitz said it is not over yet.
8. Hary Dent said we are getting into the Depression Ahead
9. Martin Sweiss said this rally in norm in a great depression
10. Gerald Celente said we are deceived by the Wall Street

MyView

Well, like how the Americans was fooled for almost 20 years that the growth that came from consumption and debt, this bailout and stimulus will not fool them for so long because the underlying fundamental of the economy is deteriorating daily. What can I said, enjoy the party while the lights is still on. Once the light is off, and the fire began, everyone will panic and rush for the emergency door, and then we will realise that there are no emergency door in the disco, they will be lots of casualty.

My point would be, we are either getting into a deflationary depression or hyperinflationary depression. We can argue until the cows come home on this, but, if you read correctly both roads lead to Depression 2.0

My take will be deflationary comes first then hyper inflationary comes later, of course, some will said otherwise. Well, everyone's opinion is based on facts and figures that they get from different sources, hence, different results.

SOS Jim Rogers Short

Jim Roger (not a trader but a Long Term Investor - i.e. > 10-20 years)

1. Long Commodities


2. Long China


3. Short Bonds (in foreseeable future 2009-2010)


4. Did not short US stocks due to printing of money (reflation), it may go up, but the USdollar worth nothing

SOS China!

Faber: China Really Growing At 2 Percent
Thursday, July 30, 2009 11:47 AMBy: Julie Crawshaw
Article Font Size

China's economy is growing at 2 percent, not the 7.8 percent its government claims, says economist Marc Faber, publisher of the Gloom, Boom and Doom report.

“The Chinese government is one of the few governments in the world that knows its GDP numbers three years in advance,” Faber told CNBC.

“I’d be a bit careful about China.”

A growing number of investors turned bullish on China after its markets began to rise last March, Faber notes, adding that it’s possible Chinese markets will continue to rise for a while.
“If you throw money at the system, lots of things go up in value — but maybe they go up for the wrong reasons. What disturbs me today … is that the lows in March and late last year, sentiment was incredibly bearish about everything.”

Now, Faber observes, “there’s this incredibly bullish sentiment when insiders are actually selling and the technical picture of the market doesn’t look that great.”

Faber believes the market faces headwinds because there’s a huge supply of available shares and a record number of new issues, which dampens share-price increases.

“My sense is that, near term, we could still have disappointments because now the mood is very optimistic. I don’t think we’ll make new market lows in Asia, but I do think we’ll have a meaningful correction.”

On Monday, China’s first initial public offering in nearly a year rose so high and so fast that regulators were forced to halt trading twice, The Washington Post reports. The Hang Seng index rose to double its low point last fall.

SOS 32 storey condo, 1 tenant

FORT MYERS, Fla. — The Vangelakos' southwest Florida condominium has marble floors, a large pool overlooking a river and modern furnishings that speak of affluence and luxury. What they don't have in the 32-story building is a single neighbor.When the Vangelakos' travel from Weehawken, N.J., to spend a week or a few days in their Florida home, they have exclusive use of the pool, game room and gym, but they miss having a few tenants around.

A large, circular fountain in front of the building is dry. The automatic glass doors that lead to the front lobby are locked. On the front desk is a guest sign-in sheet. The last entry: Feb. 13, 2009.Victor Vangelakos said they don't want to move to the tower next door because they would still be paying the mortgage and maintenance costs on the condo they own. They paid $430,000 for the unit and took out a $336,000 mortgage — essentially spending their life savings.

The family's attorney said he has filed two lawsuits on behalf of would-be tenants because the building wasn't finished as promised. He said they expected a clubhouse, marina, private cinema and restaurants.

SOS How is US rally

The worst is over. Consumer confidence has turned, they are buying now. Properties have bottomed, price is recovering. Banks are making money, the system is stabilised. What else do you need to hear? Corporate earnings improves, etc.

Some says Peter Schiff, Jim Rogers, Marc Faber and other doomist like Robert Prechter, Harry Dent, Gary Shilling, and Martin Weiss, they are all wrong. US is neither going into hyperinflation depression or deflationary depression, the economy is in Goldilocks.

And don't forget. CNBC, CNN, Fox, Bloomberg, all the financial news are merely for entertainments, period. Just treat them as another source of entertainment, nothing more. Jim Rogers once said, if you listen to CNBC and follow their investment advice, you will eventually lose your millions. I couldn't agree more.

MyView

Just treat US as a balance sheet on its own, the debt is 380% bigger than the GDP. The debt is about USD58 trillion vs GDP of USD14 trillion.

On top of the interest bearing debt, how about commitment for social care and social medic, another USD60 trillion.

What about derivatives bet of USD200 trillion.

Just assume USA is a company with such a huge debt - 58+60+200 = USD 318 trillion vs GDP of USD14 trillion.

It doesn't take a genious to know that the earnings in the Corporate is mainly contributed by debt. Just use earning growth and divided by debt growth over the last 20 years and you will realised, it takes more debt to make an EPS than many years ago. So the debt driven consumptions need to be normalised, say instead of 70% of GDP how about, for discussion sake, dropped to 60%, consumption will drop from USD9.8 trillion to USD8.4 trillion or a USD1.2 trillion drop in consumption - what is this impact on the earnings of corporate.

Not to mention, banks cannot continue to lend as the credit market is shrinking, i.e. the deleveraging not only in the mortgage markets, what about credit card market, what about student loan, and others. What about the derivatives (empty boxes) which were dumped to insurance co, pension funds, financial institutions. So with not much growth in credit in the foreseeable future, what will happen to the corporate earnings, which are highly relying on debt to grow.

In short, this following must happen before the US is rebuild:

1. reduction in debt
2. reduction in consumptions or spending
3. reduction in derivatives

There is no way out of this than to bit the bullet, and due to that you will see the entire economy going into a spin for a while. The current bailout and stimulus merely delay the reckoning and also reflate a bigger bubble. The US economy will suffer as shown in the picture above. Actually the above gurus are realistic, not pessimistic as most would like to admit.

SOS California Rolls

Deficit USD26 billion for California.

Once upon a time, there was this boy called Consumption, who consume 70% of the total GDP. As he grows, his appetite grows, he wants the best, using his credit cards, and buying gusting gas SUV, and soon he became an obesse. He also bought a few houses thinking it will supplement his income, with low interest payment for the first few years and practically minimum capital, why not.

Soon, he was way to fat, and one fine day, he collapse on the street and he was brought to the doctor. The doctor said, you are in serious condition, if you do not start reducing your weight, you will find yourself with more illness than you ever thought you might get.

So, what is the solution here? eat more, take drugs, slow down on food, exercise, reduce consumption etc?

Well, he is none other than California.

SOS China? Gary Shilling

Yeah, I believe these areas have a lot further to go on the downside. Now, it's interesting that the Asian markets had their problems in the late 1990s, because they were borrowed very heavily in dollars and other hard currencies. And when things started to come unglued, their currencies collapsed. So, they not only had huge debts, but they got bigger, and their local currencies fell against the dollar and other hard currencies.

Dugg on Forbes.com
They dealt with that problem. They built up reserves. They were running surpluses in a number of cases. That problem has shifted to Eastern Europe and the Baltics. It's amazing how that's really what their problem is. And of course, there you had even individuals who had their own little carry trade. They were borrowing in Swiss francs from Hungary to finance their mortgages.
The problem in Asia now, though, is their dependence on exports. Directly or indirectly, we estimate over half of them go to the U.S. consumer, and the U.S. consumer is in the tank. And for every 1% decline in U.S. consumer spending, our imports go down 2% to 3%. That's just the nature of the beast.

And this is a real problem, because Asia, ex-Japan, the last 10 years, they've gone from about 30% of GDP in exports, to 50%. China has been our favorite on this. [As] a matter of fact, in November of '07, when everybody thought that China was going to be strong forever--and, indeed, [that] China was going to support the U.S. if the U.S. slipped--we did a report titled: "The Chinese Middle Class, 110 Million is Not Enough."

What I was getting at in this report was that there are about 110 million people in China who have over $5,000 in income--and that's what it takes to have meaningful discretionary spending. And those are the people that can support the economy domestically. But 110 million is only 8% of the Chinese population. By contrast, in this country, it takes about $26,000, and 80% of us have that middle-class spending power.

So we concluded that China was in trouble as soon as the exports--most of them directly or indirectly to the U.S.--went down the tubes. And I think that's been the case. And now they're beginning to have civil unrest. And if you look back historically over many, many dynasties, civil unrest is what got a lot of them tossed out.

I think there's a chance that we're going to see the end of the Mao Dynasty here. Because they have 20 million people who went home for the lunar holidays [and] didn't come back because they didn't have any jobs. They're having civil disturbances--riots, if you want to call them that. They're trying to deal with this without shooting people, but it isn't getting any better.
Froehlich: I like China as a buying opportunity right now for what it's already gone through--not that it couldn't go lower. I'm not one to try to time the market. Goodness knows, that's almost impossible to do. But I do like what I see China doing, in terms of what they're spending on infrastructure, vs. what we're spending on infrastructure. They're basically spending $600 billion on infrastructure.

Shilling: Yeah, but Bob, a lot of that is double counting, smoke and mirrors. They're counting the recovery from the earthquakes last year. Two-thirds of that is supposed to be state and local money that's raised, and private money. I mean, when you get down to it, there's not an awful lot. And on top of that, their monetary ease--they're reining that in now, because people weren't putting that into bricks and mortar, that additional bank loan. They were putting it into stocks.

MyView

This piece is from Gary Shilling. He is not a bull for China, because he believe more than 50% of the GDP of China is made of exports, and exports are evaporating fast. My take, yes, although China pump in about USD1 trillion, it is mainly into infrastructure, but it is hard to replace the exports that had evaporated. No one talks about the unemployment in the manufacturing, it goes to about 30 million people, which is no joke. Mytake, as usual, against the crowd, China will suffer more first before it comes back later. And as usual, I am wrong, but I am betting that Gary Shilling.

However, everyone has their own arguement. End of the day, whoever reads it correctly will makes tonnes of money.