Archive for February, 2016

China’s Crowd-Sourced Housing Bubble Goes “Crazy” – $585,000 For A 65 Square Foot ‘Apartment’

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Via PandaHedge.com,

The price of home price in China’s tier one cities (Beijing, Shanghai, Guangzhou and Shenzhen) started another around of rally in the last couple months, and became “crazy” in Feb as described by the Chinese who form lines to buy the apartments everywhere.

When I saw this online commercial as below, I cannot help asking myself: Really?  This place can be sold as a “home” (I thought it’s just a kitchen), and at this price ($9k per sqf)?

lian jia

The ads is posted on the web site of China’s biggest online real estate agent Lianjia, showing a 6 square meters (65 sft) property which asks for RMB 3.8milion ($585k in total or $9k per sft).  Frankly speaking, this place has its good selling points: sitting at a good school zone, close to the subway and not subject to the real estate restriction policy. But really, $9k per sqf? 

Maybe you think the tiny kitchen is an isolated case, but let’s look at the following general price data.

Chart 1: Tier 1 cities ended the YoY price decline since June 2015 and enjoyed a strong rally as it did in 2010 and 2013. 

Price YoY

Chart 2:  Absolute price level of tier 1 cities (Shenzhen, Beijing and Shanghai (RMB/sqm))

3 cities absolute price

Source: Wind, blue line: Shenzhen, red line: Beijing, and blue dot line: Shanghai

The median home price in China’s top 3 tier 1 cities ranges between $0.5k to 0.6k per sqf (RMB 33k to 43k per sqm).  Based on Trulia’s data in 2015, the median home sales in NY is $1.5k per sqf and that in San Francisco is $0.95k per sqf.  However, the median household income in Shanghai is only $15,400 per year while that in NY/SF is around $59,000/$84160, so the home price to income ratio in China’s tier 1 cities is higher than those in US tier 1 cities.

Chart 3:  Price change % of tier 1 cities in the last five years

Price range YoY

Source: Wind, from left to right, Shenzhen, Beijing and Shanghai

So will investing in the tier one properties bring you stable income?  Let’s take a look at the rent yield.

Chart 4: Tier 1 cities’ rent yield in the last eight years (%)

Rent yield

Source: Wind; Red: Shanghai, Blue: Beijing and Pink: Shenzhen

 The trend of rent…
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Japan Braces For A “Turbulent, Volatile” 10-Year Auction With First Ever Negative Yield On Deck

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Two days after Japanese yields plummeted on January 29, when the BOJ unexpectedly stunned the world by announcing negative interest rates, the Japanese government sold 10 Year Bonds at what was then a near record low yield of 0.078% in an auction which carried a 0.3% coupon. Since then things have only gotten more… deflationary, and as can be seen on the chart below, as of this moment the 10Y JGB is yielding a record-0.055%

And since Japan is set to issue JPY2.4 trillion ($21 billion) in 10 year notes in a few hours, it means that for the first time ever, the Japanese government will be paid to actually “sell” 10Y paper – bonds which will have a negative yield at issue.

This won’t be the first time Japan has sold NIRP paper: as Bloomberg writes, over the past month Japanese government bonds of as long as five years in maturity sold at a negative yields, however tonight is only the first time when the entire curve through the 10 Year mark will be submerged below the X-axis.

However, where things may get tricky, is that as BBG adds demand at 10-year note auctions has declined this year as yields continued their slide, even with the central bank having the scope to buy every new bond issued as part of its stimulus program. In other words, bidders have no choice and if they want the “safety” of government backstopped collateral, they will have to pay Abe for the privilege of giving him their money for the next decade.

“There are concerns about who would actually buy 10-year bonds with negative yields,” said Shuichi Ohsaki, the chief Japan rates strategist at Bank of America Merrill Lynch. “Even if you wanted to participate in the BOJ trade, you would have to hold onto the bond until it becomes eligible for the BOJ operation. And with the increase in volatility, it’s a tough one to trade.”

Where things get even more complicated is that in China the concept of a yield curve is practically non-existent: as the chart below shows, the JGB yield curve was the flattest on record at the end of last week, under pressure from the BOJ’s bond purchases, with the premium offered by 10-year securities over two-year notes…
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Workers At Tesla’s Gigafactory Stage Mass Walk Out Protesting Out Of State Employees

Courtesy of ZeroHedge. View original post here.

All is not well in the non-GAAP paradise known as Tesla's Gigafactory, where labor tensions are suddenly running high.

According to Bloomberg, at least 100 workers at the construction site for Tesla's massive (and taxpayer subsidized) battery factory near Reno, Nevada, walked off the job Monday to protest use of workers from other states, a union official said.

It used to be that workers were upset when foreigners were brought in; now it's workers from out of state.

Local labor leaders are upset that Tesla contractor Brycon Corp. is bringing in workers from Arizona and New Mexico, said Todd Koch (no relation to the billionaire family by the same name) president of the Building and Construction Trades Council of Northern Nevada.

The escalation in interstate labor tensions mirrors the fragmentation of Europe, where with an imminent collapse of the Schengen customs union, members of the neighboring EU countries will soon revolt when working side by side. Perhaps it only makes sense that with globalization now running in reverse, and with Europe falling apart at the seams, that the US will follow suit by defederalizing.

The local union's the soundbites certainly indicate that "out-of-state workers are clearly not welcome."

"It’s a slap in the face to Nevada workers to walk through the parking lot at the job site and see all these license plates from Arizona and New Mexico,” Koch said in an interview. Those who walked out were among the hundreds on the site, he said.

Construction work at the $5 billion, 10-million-square-foot factory has been proceeding ahead of schedule. Tesla said in an e-mailed statement that the nonunion contractor involved in the dispute Monday, which it didn’t identify by name, is using more than 50 percent Nevada workers and that more than 75 percent of the factory workforce is residents of that state. Tesla didn’t say how the walkout is affecting work at the site.

Of course, the only reason for that is because otherwise the generous subsidies provided to Elon Musk by Nevada taxpayers would be voided. As a reminder, in September 2014, Musk and Nevada Governor Brian Sandoval announced a deal that included as much as $1.25 billion in tax breaks over…
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Law Professor Slams Summers: “Cash Is The Currency Of Freedom”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

By Glenn Harlan Reyonds, aka Instapundit, a University of Tennessee law professor, originally posted on USA Today

Cash Is The Currency Of Freedom

As Fed inflates away dollar’s value, government gains more control to manipulate taxpayers and savers

Former Treasury secretary Larry Summers wants to get rid of the $100 bill. But I think he has it exactly backward. I think we need to restore the $500 and $1000 bills. And the reason is that people like Larry Summers have done a horrible job.

Summers wrote recently in The Washington Post that the $100 bill needs to go. The reason, he says, is that it’s a favorite of criminals, along with the 500 euro note, which is likely to be discontinued. The New York Times editorialized in agreement, writing: “Getting rid of big bills will make it harder for criminals to do business and make it easier for law enforcement to detect illicit activity. … There is no need for large-denomination currency. Britain’s top bill is the 50-pound note ($72), which has been perfectly sufficient. The United States stopped distributing $500, $1,000, $5,000 and $10,000 bills in 1969. There are now so many ways to pay for things, and eliminating big bills should create few problems.”

Reading this got me to thinking: What is a $100 bill worth now, compared to 1969? According to the U.S. Inflation Calculator online, a $100 bill today has the equivalent purchasing power of $15.49 in 1969 dollars. Likewise, in 1969, a $100 bill had the equivalent purchasing power of $645.55 in today’s dollars.

So even if we brought back the discontinued $500 bill, it wouldn’t have the purchasing power today that a $100 bill had in 1969, when larger denominations were discontinued. And carrying around a $100 bill today is basically like carrying around a $20 in 1969.

And although inflation isn’t running very high at the moment, this trend will only continue. If the next few decades are like the last few, paper money in current denominations will become basically useless.

Of course, as CATO Institute analyst Daniel J. Mitchell writes, to our ruling class this isn’t a bug, but a feature. Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and organized crime,…
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Exporting Death & Destruction

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Nothing says Nobel Peace Prize like being the world’s largest (by a long way) exporter of arms…

The US was by far the top arms exporter in 2011-15, with a 33 per cent share of the global market. Exports from the US have increased 27 per cent in the last five years.

As The Independent reports, the number of major weapons switching hands around the world was up 14 per cent in the last five years, compared to the five years before that.

The Stockholm International Peace Research Institute, an independent resource on global security, has released a study that shows that India is the world’s largest importer of arms.

The chart above shows that Asia was the main importer of weapons in the last five years, as the region races to arm itself ahead of its regional rivals: China and Pakistan. The high levels of Indian imports are also the result of its small domestic arms industry, which means it has to buy weapons from overseas.

Russia is the biggest supplier of arms to India, ahead of the US. But US imports there are growing. They were 11 times higher in 2011-2015 than 2006-2010.

Leaving us with one big (quite scary) question – why is India suddenly preparing for war?





Exporting Death & Destruction

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Nothing says Nobel Peace Prize like being the world's largest (by a long way) exporter of arms…

The US was by far the top arms exporter in 2011-15, with a 33 per cent share of the global market. Exports from the US have increased 27 per cent in the last five years.

As The Independent reports, the number of major weapons switching hands around the world was up 14 per cent in the last five years, compared to the five years before that.

The Stockholm International Peace Research Institute, an independent resource on global security, has released a study that shows that India is the world's largest importer of arms.

The chart above shows that Asia was the main importer of weapons in the last five years, as the region races to arm itself ahead of its regional rivals: China and Pakistan. The high levels of Indian imports are also the result of its small domestic arms industry, which means it has to buy weapons from overseas.

Russia is the biggest supplier of arms to India, ahead of the US. But US imports there are growing. They were 11 times higher in 2011-2015 than 2006-2010.

Leaving us with one big (quite scary) question – why is India suddenly preparing for war?





Get Shorty? PBOC Strengthens Yuan, Erases All RRR-Cut Swing

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

For the first time in six days, PBOC decided to strengthen the Yuan fix (+0.1% to 6.5385). This sent offshore Yuan surging back to pre-RRR-Cut levels, ensuring that (for the very short-term) speculators don’t get any ideas about piling into a Yuan short (again). This action followed the suspension of China’s Open Market Operations (due to lack of interest from traders).

Following this morning’s surprise RRR Cut, The PBOC decides now is the time to strengthen Yuan…

  • *PBOC RAISES YUAN FIXING BY 0.1% TO 6.5385/USD
  • *PBOC RAISES YUAN FIXING FIRST TIME IN SIX DAYS

Wiping out the Yuan swing from today…

Let’s see how long this holds.

PBOC’s Chen had some comments on the matter (just don’t tell the Japanese)

  • *YUAN DEPRECIATION HAS LIMITED IMPACT ON HELPING EXPORTERS: CHEN
  • *YUAN DEPRECIATION WILL INCREASE PROCESSING TRADE COSTS: CHEN
  • *NOT MUCH ROOM FOR YUAN DEPRECIATION: PBOC’S CHEN
  • *NO BASIS FOR CONTINUED YUAN DEPRECIATION: CHEN

In other words – Don’t short it, or else!





The Long History of Government Meddling In The American Marketplace

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Mike Holly via The Mises Institute,

Although the causes of economic crises recurring throughout US history and often spreading worldwide can’t be proven using empirical means, oppressive government regulations favoring special interests in relevant industries have preceded every crisis.

Typically, cronyism involves support of politicians in exchange for regulations denying others the freedom to compete with the moneyed interests (e.g., monopolies). Less competition leads to higher costs and lower quality. It reduces economic growth, jobs, wages, innovation, and productivity. Attempts to control economic growth through government spending and/or manipulating interest rates (e.g., stimulate growth with low rates) generally leads to more severe crises.

None of these things are recent phenomena, but can be found again and again throughout American history.

Mercantilism

After the Revolutionary War, when the agrarian economy was beginning to industrialize, politicians pursued British-style mercantilism, including colonialism, against natives and regulations blocking competition in banking and manufacturing. Financial panics and depressions resulted under a national bank in 1792 and from 1819–21 and state-regulated banks from 1837–43 and 1857–59.

The Civil War was a dispute between Republicans representing manufacturers in the North that blocked free trade with import tariffs against Europe, and Democrats representing agricultural plantations in the South that refused to replace slavery with mechanization using the North’s high-cost goods.

Monopolization

The “Gilded Age of Capitalism” shifted the economy from agriculture to industry led by “robber barons” who lobbied mostly Republicans. The government helped create railroad monopolies with low-interest loans, land grants, and special frontier privileges. The railroads formed a conglomerate that monopolized much of the rest of the economy by favoring large over small customers (e.g., Rockefeller’s Standard Oil over farmers), large suppliers (e.g., Carnegie Steel), and big banks (e.g., J.P. Morgan).

Both railroads and banking (with both national and state banks) were implicated in the severe financial panics from 1873–78 and 1893–97, occurring during the Long Depression of 1873–96, and another panic in 1901. Banking regulation led to the panic in 1907.

During the Progressive Era, the US used regulation to form many of today’s monopolies. From 1906 to 1910, Republicans led…
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The Agriculture Space – The Meats (Video)

Courtesy of EconMatters

We look at Live Cattle, Feeder Cattle, Lean Hogs, and Class III Milk Futures Markets in this video. We can learn the value of the technicals in analyzing these historically technically driven markets in this video. 

 

 
 




China PMIs Plunge, Economists Demand Stimulus To “Prevent Economy Falling Off A Cliff”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

So, after $1 trillion in new credit, numerous RRR cuts, a devalued currency (great for exporters, right?), and the domestic exuberance of a housing bubble, China's economy (manufacturing and non-manufacturing) collapsed to cycle lows (weakest since Dec 08) in February. Of course, this plunge after January's bounce is all being blamed on the Lunar New Year… and in fact, according to The NBS, manufacturing confidence is increasing (seriously that's what they said!)

  • *CHINA MANUFACTURING PMI AT 49.0 IN FEB. (49.4 EXP.)
  • *CHINA NON-MANUFACTURING PMI AT 52.7 IN FEB.

Does this look like "confidence" to you?

So to be clear – China Services PMI went from the highest since June 2014 to the lowest since Dec 2008 in one month.

It appears a trillion dollars doesn't go as far as it used to.

One can't help but wonder, following these comments from PBOC's Chen…

  • *WE HOPE TO COMMUNICATE CANDIDLY WITH FED: PBOC'S CHEN
  • *CHINA, U.S. CENTRAL BANKS SHOULD IMPROVE COORDINATION: CHEN
  • *STRONG DOLLAR CYCLE MAY TRIGGER CRISIS IN EMERGING MKT: CHEN

Whether this is some Fed-targeted dumping of bad data to allow turmoil and force The Fed to relent.

The data deluge continued to get worse as Caixin/Markit reported:

  • *CHINA FEB. CAIXIN MANUFACTURING PMI 48; EST. 48.4 (5 MONTH LOWS)

“The Caixin China General Manufacturing PMI for February is 48, down 0.4 points from the previous month. The index readings for all key categories including output, new orders and employment signalled that conditions worsened, in line with signs that the economy’s road to stability remains bumpy."

Staff numbers declined at the sharpest rate since January 2009 during February. Companies that recorded lower headcounts widely commented on company downsizing policies as part of cost-cutting initiatives, along with the non-replacement of voluntary leavers. Despite lower employment, manufacturers were able to work through outstanding business during February. Though marginal, it was the first reduction in the level of work-in-hand since April 2015.

The government needs to press ahead with reforms, while adopting moderate stimulus policies and strengthening support of the economy in other ways to prevent it from falling off a cliff.





 
 
 

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Wilshire 5000 Creating A Triple Top? An Important Breakout Test Is In Play!

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The stock market has been on fire of late, rallying up to the edge of price resistance on several indexes. Today, we look at one of those stock market indexes: the Wilshire 5000.

The Wilshire 5000 tracks all of the stocks in the US market, so it is a broad-based index that carries significant importance when gauging the health of the overall US stock market.

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Jefferies Upgrades Deere, Cites 'Significantly Improved Farmer Income Outlook'

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The high seas are getting lower. dianemeise

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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

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Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

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This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

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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