Latest from the Chinese Real Estate Bubble: French Chateaux
by ilene - January 30th, 2010 10:53 am
Latest from the Chinese Real Estate Bubble: French Chateaux
Posted by Joshua M Brown, The Reformed Broker
"While the über -wealthy are splashing the cash and taking advantage of low interest rates, a recent report by the Chinese Academy of Social Sciences showed more than 80 per cent of urban Chinese cannot afford to buy homes."
The newly-wealthy plutocrats of Beijing are now embarking on that traditional mainstay of nouveau riche everywhere: the construction of McMansions. Our favorite communist billionaires have decided on a decidedly European mode of housing, the French Chateau, as their display of wealth.
These neighborhoods full of mini-Versailles have been around since at least 2007. What is new though is the fact that they are now being built everywhere, even next to the airport. It should also be noted that the homes are selling out before construction begins.
Where have I heard things like that before?
From The Independent:
As the rest of the world reels from the lingering effects of the credit crunch, China is undergoing a property boom. All over the country they are building slightly alarming neo-Gothic, neo-Tudor, neo-classical piles as the communist nation’s super-rich hunger for the look of a European pad combined with the luxury of an Asian high-end villa.
At the Palais de Fortune development, houses cost up to £5.5m each. They are generally sold long before they are built to Chinese buyers, either from the mainland or from Hong Kong. Inside, the compound feels like another planet, as you pass golden golf carts with badges on the bonnet reminiscent of Rolls-Royce’s Silver Lady. The villas are an incongruous vision of European elegance amid the more typical Beijing suburban features of flat-bed tricycles and barely paved dirt roads.
"The first two phases are all sold out, and we have started working on phase three," said Tang Ming, deputy marketing director for the development.
Just for fun, take out the references to Asia or China from the article and substitute Miami or Malibu.
Source:
French luxury tells a tale of China’s haves and have-nots (The Independent)
Read Also:
Of Course Chinese Real Estate is a Bubble. Grow Up. (TRB)
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DiggStrong GDP growth with weak fundamentals
by ilene - January 30th, 2010 10:33 am
Strong GDP growth with weak fundamentals
Courtesy of James D. Hamilton at Econbrowser
The Bureau of Economic Analysis reported today that the seasonally adjusted real value of the nation’s production of goods and services grew at a 5.7% annual rate during the fourth quarter. That’s great news, but…
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Three-fifths of that Q4 GDP growth came from the fact that businesses were drawing down inventories more slowly than they had the quarter before. Firms sold $8.5 billion more goods (at a quarterly rate) in 2009:Q4 than they produced, and met those sales by drawing down inventories by $8.5 billion. This reduction in inventories counts as negative investment spending of -$8.5 billion at a quarterly rate (or -$34 B at the annual rate these numbers are typically reported) for purposes of calculating fourth-quarter GDP. Firms sold $34.8 billion more than they produced in 2009:Q3, which amounted to negative inventory investment of -$139 B at an annual rate for Q3. Since this component of investment spending went from -139 to -34, it counts as positive growth when you compare Q3 GDP with Q4 GDP. This mechanism alone contributed 3.4 percentage points to the 5.7% growth rate for real GDP reported for Q4.
To put it another way, if consumers, businesses, foreigners, and the government had all purchased exactly the same quantity of real goods and services in 2009:Q4 as they had in 2009:Q3, more of those sales would have come out of inventory drawdown in Q3 than in Q4, so even without any gain in final sales we would have had to produce more stuff in Q4 than Q3, specifically, 3.4% more stuff at an annual rate. In fact real final sales to consumers, businesses, foreigners, and the government were not stagnant, but grew at a 2.3% annual rate during the fourth quarter, and the two effects combined give us the 5.7% reported GDP growth.
Just because the production gains can be accounted for in terms of slower inventory drawdown doesn’t mean they aren’t real, and doesn’t mean they can’t continue. I noted in July that we might expect inventory restocking to add 1.6% to the annual GDP growth rate…
Bank Failure Friday
by ilene - January 30th, 2010 10:24 am
Queen – ‘Another One Bites the Dust’
SIX MORE BANKS BITE THE DUST IN 2010.
Courtesy of IntheMoneyStocks
The six bank failures in the U.S. are listed below:
American Marine Bank, Bainbridge Island, WA
First Regional Bank, Los Angeles, CA
Community Bank & Trust, Cornelia, GA
Marshall Bank, Hallock, MN
Florida Community Bank, Immokalee, FL
First National Bank of Georgia, Carrollton, GA
Source: www.fdic.gov
When The Markets Talk To Us
by ilene - January 30th, 2010 10:17 am
When The Markets Talk To Us
Courtesy of Nicholas Santiago at InTheMoneyStock’s Rant and Rave Blog
This morning the market soared higher after the Gross Domestic Product (GDP) report by the U.S. government. Reportedly the GDP increased 5.7 percent in the final quarter of the year. This news was much better than economists had expected, and a rally was underway to start the day. This was another day when the good news just kept pouring in and the media headlines looked great. Then one might ask, why did the market reverse after making a 10:30 am high? Please realize that the NASDAQ was trading at 2202.00 during the morning peak and is now below 2175.00, and negative on the day.
Often when a "buy the rumor, sell the news" type event takes place it is usually because price is already built into the market. However, today many leading technology stocks have rolled over intra day even as they are at major daily chart support levels. Leading stocks such as Apple Computer (NASDAQ:AAPL) have reversed to the negative side by selling off more than eight points intra day from today’s early session highs to the recent intra day low. Sandisk Corp (NASDAQ:SNDK) is another leading stock that is getting punished today by traders and investors. However, this stock gapped lower and has continued to sell off into its daily 50 moving average at 25.80 which should be some short term support. Microsoft Corp (NASDAQ:MSFT) is another stock that supposedly had very good earnings and was trading higher to start the day. This stock gapped up higher at the open by trading at 29.90. Since that opening print the stock has sold off and reversed to the negative side.
What is this telling us when good stocks can’t hold their gains after good news? Often it tells us that conditions have changed. The market has obviously priced in the good expectations from earnings and even the economic data. It is prudent to remember that the market is similar to a pendulum. Often the markets swing to one side too far, and then to the other side too far, and rarely finds that common middle ground or equilibrium point.
With that being sad one should always realize that you can’t fight the tape and the market is always right. Therefore, price action is king and…
When The Markets Talk To Us
by Chart School - January 30th, 2010 10:00 am
When The Markets Talk To Us
Courtesy of Nicholas Santiago at InTheMoneyStock’s Rant and Rave Blog
This morning the market soared higher after the Gross Domestic Product (GDP) report by the U.S. government. Reportedly the GDP increased 5.7 percent in the final quarter of the year. This news was much better than economists had expected, and a rally was underway to start the day. This was another day when the good news just kept pouring in and the media headlines looked great. Then one might ask, why did the market reverse after making a 10:30 am high? Please realize that the NASDAQ was trading at 2202.00 during the morning peak and is now below 2175.00, and negative on the day.
Often when a "buy the rumor, sell the news" type event takes place it is usually because price is already built into the market. However, today many leading technology stocks have rolled over intra day even as they are at major daily chart support levels. Leading stocks such as Apple Computer (NASDAQ:AAPL) have reversed to the negative side by selling off more than eight points intra day from today’s early session highs to the recent intra day low. Sandisk Corp (NASDAQ:SNDK) is another leading stock that is getting punished today by traders and investors. However, this stock gapped lower and has continued to sell off into its daily 50 moving average at 25.80 which should be some short term support. Microsoft Corp (NASDAQ:MSFT) is another stock that supposedly had very good earnings and was trading higher to start the day. This stock gapped up higher at the open by trading at 29.90. Since that opening print the stock has sold off and reversed to the negative side.
What is this telling us when good stocks can’t hold their gains after good news? Often it tells us that conditions have changed. The market has obviously priced in the good expectations from earnings and even the economic data. It is prudent to remember that the market is similar to a pendulum. Often the markets swing to one side too far, and then to the other side too far, and rarely finds that common middle ground or equilibrium point.
With that being sad one should always realize that you can’t fight the tape and the market is always right. Therefore, price action is king and…
As The Dollar Inches Into Resistance, Expect A Commodity And Market Bounce
by Chart School - January 30th, 2010 9:48 am
Courtesy of InTheMoneyStocks.com
As The Dollar Inches Into Resistance, Expect A Commodity And Market Bounce |
| 01.29.10 |
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The markets have tumbled over the last two weeks giving a sour start to 2010. Many point to the fall as being a result of President Obama’s tough talk on bank regulation, not allowing them to take risks that have been the key driver of profits. The Financial Select Sector SPDR (ETF) (NYSE:XLF) has tumbled in the last two weeks over 7%. Stocks like Goldman Sachs Group, Inc. (NYSE:GS) has tumbled from its the highs on January 7th, 2010 of $179.75 to recent lows of $148.27. While many blame earnings and the Presidents tough talk against Wall Street there is another culprit. It seems that the real key to the drop on Wall Street is none other than the U.S. Dollar. The dollar has spiked higher over the last few months killing commodity prices. Price of oil had dropped dramatically along with gold. Stocks like Southern Copper Corporation (USA) (NYSE:PCU), Steel Dynamics, Inc. (NASDAQ:STLD) had crashed in the last three weeks. These two stocks have fallen 27% and 25% respectively. In addition, the biggest players in the commodity realm have also seen a major price correction. Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX), each a major component of the DOW have collapsed almost 10%. Being a major part of the DOW, this type of drop has a dramatic effect on the index itself and could be looked as a major portion of the losses in the last two weeks in the markets. The root of the issue all comes back to the dollar. As the dollar has ripped higher, commodities have fallen. iPath S&P GSCI Crude Oil Total Return (NYSE:OIL) has fallen from $27.22 to $23.44. That is a 14% drop in a mere two weeks. The impact on the markets of this type of fall in commodities is earth shattering. To find the bottom in this market, the point where this market will get a significant bounce, one must turn to the charts of not oil, not gold, not XOM, CVX, GS or the XLF but to the U.S. Dollar. Everything comes back simply to the dollar. PowerShares DB US |
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CHART OF THE DAY: SENTIMENT AND LIQUIDITY
by Chart School - January 30th, 2010 9:14 am
CHART OF THE DAY: SENTIMENT AND LIQUIDITY
Courtesy of The Pragmatic Capitalist
Barry Ritholtz at The Big Picture posted a great chart the other day on liquidity and sentiment. He notes some interesting commentary from his partner Kevin Lane at Fusion Analytics:
As seen above in the chart above individual investor allocations to equities has only recently moved back above its 21 year mean allocation of 60%. The massive under allocation to equities in late 2008 into the 2009 low was one of the major reasons we became so bullish on stocks since it suggested that selling was washed out of the market and that massive liquidity (aka – buying power) was built up ready to buy back into stocks.
Although investors have moved to a slightly overweight position they do not currently see the sentiment levels as alarmingly high as we saw near other major market tops. Therefore, they think stocks have the potential to move higher and that downturns will likely be opportunities to add to equities. See the full commentary from Lane at The Big Picture.
Source: TBP
CHART OF THE DAY: SENTIMENT AND LIQUIDITY
by ilene - January 30th, 2010 9:12 am
CHART OF THE DAY: SENTIMENT AND LIQUIDITY
Courtesy of The Pragmatic Capitalist
Barry Ritholtz at The Big Picture posted a great chart the other day on liquidity and sentiment. He notes some interesting commentary from his partner Kevin Lane at Fusion Analytics:
As seen above in the chart above individual investor allocations to equities has only recently moved back above its 21 year mean allocation of 60%. The massive under allocation to equities in late 2008 into the 2009 low was one of the major reasons we became so bullish on stocks since it suggested that selling was washed out of the market and that massive liquidity (aka – buying power) was built up ready to buy back into stocks.
Although investors have moved to a slightly overweight position they do not currently see the sentiment levels as alarmingly high as we saw near other major market tops. Therefore, they think stocks have the potential to move higher and that downturns will likely be opportunities to add to equities. See the full commentary from Lane at The Big Picture.
Source: TBP
THE TECHNICAL LOOK: MORE CORRECTION AHEAD
by Chart School - January 30th, 2010 9:04 am
THE TECHNICAL LOOK: MORE CORRECTION AHEAD
Courtesy of The Pragmatic Capitalist
The technical perspective from Decision Point:
Last week’s breakdown led me to believe that a medium-term correction was just beginning. So far this week that opinion has been reinforced by market action. For example, as of last Friday, short-term indicators were very oversold, and a technical bounce was to be expected; however, the market instead has drifted lower, causing me to assume that the oversold condition is being cleared by a decelerated decline rather than a reaction rally. This is bearish behavior, but there is no technical reason to believe that it is announcing a new bear market, only that bullish behavior will be in abeyance while 
The weekly-based chart of the S&P 500 shows that the PMO is very overbought and has crossed down through its 10-EMA. It could take a few months to clear this condition by bringing the PMO back to the zero line.
Our intermediate-term indicators are no longer overbought, and they are low enough to support another price bottom; however, I would be happier to see them bottoming in the -150 area.
Bottom Line: I would like to see this correction continue for a few months. Keep in mind that corrections in bull markets do not have to be straight down affairs, rather there can be extended movement to the side and slightly down that serves the purpose of getting internals set for another advance without causing too much price damage.
The most obvious immediate support is around 1030, followed by a series of previous lows going down to 980, which would be the worst case if this correction is to remain in the “mild-to-moderate” category. If prices eventually drop to the area of the support at 870, that would be severe enough to start questioning our bull
In the meantime, if prices continue lower, our timing models will start switching from buy to neutral. This could begin as soon as next week.
Source: Decision Point
THE TECHNICAL LOOK: MORE CORRECTION AHEAD
by ilene - January 30th, 2010 9:03 am
THE TECHNICAL LOOK: MORE CORRECTION AHEAD
Courtesy of The Pragmatic Capitalist
The technical perspective from Decision Point:
Last week’s breakdown led me to believe that a medium-term correction was just beginning. So far this week that opinion has been reinforced by market action. For example, as of last Friday, short-term indicators were very oversold, and a technical bounce was to be expected; however, the market instead has drifted lower, causing me to assume that the oversold condition is being cleared by a decelerated decline rather than a reaction rally. This is bearish behavior, but there is no technical reason to believe that it is announcing a new bear market, only that bullish behavior will be in abeyance while prices work through the correction.
The weekly-based chart of the S&P 500 shows that the PMO is very overbought and has crossed down through its 10-EMA. It could take a few months to clear this condition by bringing the PMO back to the zero line.
Our intermediate-term indicators are no longer overbought, and they are low enough to support another price bottom; however, I would be happier to see them bottoming in the -150 area.
Bottom Line: I would like to see this correction continue for a few months. Keep in mind that corrections in bull markets do not have to be straight down affairs, rather there can be extended movement to the side and slightly down that serves the purpose of getting internals set for another advance without causing too much price damage.
The most obvious immediate support is around 1030, followed by a series of previous lows going down to 980, which would be the worst case if this correction is to remain in the “mild-to-moderate” category. If prices eventually drop to the area of the support at 870, that would be severe enough to start questioning our bull
In the meantime, if prices continue lower, our timing models will start switching from buy to neutral. This could begin as soon as next week.
Source: Decision Point
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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