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 Post subject: The worlds most important asset class.......
PostPosted: Fri Nov 17, 2017 5:41 am 
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"For the last 40 years, the world's most important asset class has been – depending on your perspective – the dollar, US Treasuries (so same thing) or oil," Bernstein analyst Michael Porter says. Now none of them pass muster.

"The definition of 'important' is malleable but try this one: name an asset class that – were it to either fall or rise in value by 30 per cent – would inexorably imply a global recession or a global boom?

"Oil, gold and arguably the US dollar fail that test for the simple reason that all have seen price changes of or near that magnitude this decade with little direct effect on the global economy," Porter says.

So what is the world's most important asset class now?

Answer: Chinese real estate.

"The health of the Chinese property market drives global demand for iron ore, coal, aluminum, oil, copper, steel, natural gas as well as trucks, cranes and excavators and other capital goods," Porter says.

"Rising property prices staunch the outflow of currency which could tank the [renminbi] along with every currency and every asset class in every emerging market globally. Chinese property prices also drive wealth effects and with it demand for premium autos, gaming activity, luxury goods, premium spirits, air travel, leisure, hospitality, aircraft, and demand for general retail of every description.

"China is either the largest consumer of each of these categories globally or holds the largest growth share in each of these categories globally. A downturn is not simply bad news for China. A downturn in property prices in China means a material cut to demand for all these end markets globally, and an even more substantial hit to sentiment."


http://www.smh.com.au/business/markets- ... zn6ds.html

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http://www.afr.com/personal-finance/the ... 115-gzlmsh

could of put this in the China thread but since its also about the global aspect


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 Post subject: Re: The worlds most important asset class.......
PostPosted: Fri Nov 17, 2017 10:00 am 
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Well, I have my doubts that it's about price. I think it's about volume, and the volume is relatively independent of price, given the debt financing. So probably it would be closer to say debt financing of property construction is the most important asset class, but that doesn't sound very sexy, since that's been true for twenty years...

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 Post subject: Re: The worlds most important asset class.......
PostPosted: Fri Nov 17, 2017 11:40 am 
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Blindjustice BATONEFFECT wrote:
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A downturn is not simply bad news for China. A downturn in property prices in China means a material cut to demand for all these end markets globally...


No problem. We just need a few more countries with 1,000,000,000+ population. 8DD

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 Post subject: Re: The worlds most important asset class.......
PostPosted: Fri Nov 17, 2017 2:26 pm 
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Is it a whole load of nothing or are we staring down GFC part 2?


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 Post subject: Re: The worlds most important asset class.......
PostPosted: Fri Nov 17, 2017 11:27 pm 
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Blindjustice BATONEFFECT wrote:
Is it a whole load of nothing or are we staring down GFC part 2?


Part 2 is the right way of putting it, none of the fundamental problems that led to the 2008 crash have actually been fixed. I think I said years ago that the response of the powers that be in 2008 was basically waving a cotton bud at a man who has just had his arm chopped off.

Eventually he's going to bleed out regardless. QE and ZIRP and extend-and-pretend...it'll all come crashing down eventually and the decade of denial is only going to make the eventual mess much, much worse than if it had been dealt with properly in 2008.

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 Post subject: Re: The worlds most important asset class.......
PostPosted: Sat Nov 18, 2017 6:52 pm 
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Blindjustice BATONEFFECT wrote:
Is it a whole load of nothing or are we staring down GFC part 2?


Like Sidewinder said the GFC was papered over rather than resolved. QE and ZIRP are the paper, the crack is the rise in inequality between the working and middle class and the upper class in the west and the unwillingless or inability due to neo-liberalism doctrine to get the QE/ZIRP money to those that actually need it and whose spending of it would get us out of this mess.

There was a lot of money pumped into US and Western property bubbles following the Dot-Com crash and 9/11 and it went pop when it became evident to everyone that strippers and shelf stackers can't afford 3 gaffs whilst their income doesn't rise. QE/ZIRP was the cash pump that saved us from meltdown following the GFC but where has that cash gone? Is it inflating a bubble? What will pop it?

The stock market looks like a bubble. Chinese property looks like a bubble. Loads of Countries in the west have property bubbles. What will pop them though, and which one will be the base of the house of cards?

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 Post subject: Re: The worlds most important asset class.......
PostPosted: Sat Nov 18, 2017 11:03 pm 
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and how long can it last?


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 Post subject: Re: The worlds most important asset class.......
PostPosted: Sat Nov 18, 2017 11:58 pm 
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This time the debt is a lot worse, and practically every major sov is deficit spending into the bubble.


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 Post subject: Re: The worlds most important asset class.......
PostPosted: Sun Nov 19, 2017 5:10 am 
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Going back to the China property situation for a moment, this is from a very recent article in the HK press. The details of how these young Chinese managed to finance their flat purchases and then service them should be concerning for anyone with an interest in global economic stability. It's also clear, if it wasn't obvious already, that the very high deposits demanded by the banks are often achieved using other sources of debt, such as tapping the parents pension savings. Combined with China's rapidly aging population, this has disaster written all over it.

Quote:
In May last year, after the value of his first flat, a 70 square metre unit in Guangzhou’s Panyu subdistrict, soared from 900,000 yuan (US$136,500) to 1.2 million yuan in just a few months, Mai, who has a monthly salary of 15,000 yuan, decided to raise the down payment for a new property to cash in on the booming housing market.

In June, he emptied his and his parents’ 300,000 yuan in savings and incurred debts to friends to muster the 50 per cent down payment for a 2.4 million yuan flat.
To meet the mortgage repayments of about 12,000 yuan a month on the two flats, and other debts to friends, he used the first flat as collateral for a loan about 800,000 yuan and got 200,000 yuan in cash from a short-term consumer loans supposedly for a car.

Mai got the money easily from local banks and financial institutions. Now, he needs to pay about 25,000 yuan a month for loans totalling around 3 million yuan, including around 4,000 yuan in mortgage payments for his first flat, about 7,300 yuan in mortgage payments for his second flat, nearly 9,000 yuan on the secondary mortgage for his first flat, 3,800 yuan for car loans, and the rest to service debts to family members and friends.

In Wang’s case, she borrowed 500,000 yuan from her parents, relatives and friends and sourced another 300,000 yuan from credit cards and consumer loans to pull together 800,000 yuan late last year for the minimum down payment on a small flat.
She also borrowed 1.8 million yuan from a bank, with monthly mortgage payments of about 9,600 yuan – 80 per cent of her monthly income – for 30 years. To help cover the mortgage, her mother, a retiree who lives 4,000km away in a city in northeastern China, remits the bulk of her pension to Wang.
“The debts are huge to me,” Wang said. “But a person without a flat has no future in Shenzhen.”




http://www.scmp.com/news/china/economy/ ... me-spectre


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 Post subject: Re: The worlds most important asset class.......
PostPosted: Sun Nov 19, 2017 8:47 am 
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Chinese population dynamics are very poor - I think the population will peak by 2030 and will then fall short of large scale immigration from poorer parts of Asia.

The same thing is happening in Japan. A shrinking population and very little immigration keeps a lid on prices.


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