NEW YORK – The problems with China’s economic-growth pattern have become well known in recent years, with the Chinese stock-market’s recent free-fall bringing them into sharper focus. But discussions of the Chinese economy’s imbalances and vulnerabilities tend to neglect some of the more positive elements of its structural evolution, particularly the government’s track record of prompt corrective intervention, and the substantial state balance sheet that can be deployed, if necessary.
In this regard, however, the stock-market bubble that developed in the first half of the year should be viewed as an exception. Not only did Chinese regulators enable the bubble’s growth by allowing retail investors – many of them newcomers to the market – to engage in margin trading (using borrowed money); the policy response to the market correction that began in late June has also been highly problematic.Den Rest des Beitrags lesen »
Robert J. Shiller, a 2013 Nobel laureate in economics, is Professor of Economics at Yale University and the co-creator of the Case-Shiller Index of US house prices. He is the author of Irrational Exuberance, the second edition of which predicted the coming collapse of the real-estate bubble, and, most recently, Finance and the Good Society.
NEW HAVEN – In recent months, concern has intensified among the world’s financial experts and news media that overheated asset markets – real estate, equities, and long-term bonds– could lead to a major correction and another economic crisis. The general public seems unbothered: Google Trends shows some pickup in the search term “stock market bubble,” but it is not at its peak 2007 levels, and “housing bubble” searches are relatively infrequent.
But the experts’ concern is notable and healthy, because the belief that markets are always efficient can survive only when some people do not completely believe it and think that they can profit by timing the markets.At the same time, this heightened concern carries dangers, too, because we do not know whether it will lead to a public overreaction on the downside.
International agencies recently issued warnings about speculative excesses in asset markets, suggesting that we should be worried about a possible crisis. In a speech in June, International Monetary Fund Deputy Managing Director Min Zhu argued that housing markets in several countries, including in Europe, Asia, and the Americas, “show signs of overheating.” The same month, the Bank for International Settlements said in its Annual Report that such “signs are worrying.” Den Rest des Beitrags lesen »
Central banks around the world are pumping trillions into the economy. The goal is to stimulate growth, but their actions are also driving up prices in the real estate and equities markets. The question is no longer whether there will be a crash, but when.
When 42-year-old hedge fund manager Mark Spitznagel wants to forget about his high-stakes business for a while, he heads to the goat farm he and his wife Amy purchased in the bucolic hills of Michigan. There, he produces cheese according to environmentally sustainable methods, because he views modern agriculture, with its large-scale pesticide use and automated factory farms, as degenerate. In fact, he says, factory farming is “an ideal metaphor” for the economy.
In Spitznagel’s view, the world’s financial and equities markets are also dysfunctional,and what happens there is unhealthy and anything but sustainable. As a money manager, he has also opted for an alternative business model of sorts: He’s betting on a crash.
For his customers, Spitznagel’s multi-billion-dollar fund acts as an insurance policy against the next meltdown in the financial system. When the market is doing well, they lose modest amounts of money. But they cash in as soon as prices take a nosedive, even when all other investments are going up in smoke.
The hedge fund manager has made a lot of money in the past with his prognoses, and he is convinced that substantial turbulence is on the cards for the near future. “The setup is there for it,” says Spitznagel.
Nouriel Roubini, a professor at NYU’s Stern School of Business and Chairman of Roubini Global Economics, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.
NEW YORK – It is widely agreed that a series of collapsing housing-market bubbles triggered the global financial crisis of 2008-2009, along with the severe recession that followed. While the United States is the best-known case, a combination of lax regulation and supervision of banks and low policy interest rates fueled similar bubbles in the United Kingdom, Spain, Ireland, Iceland, and Dubai. Den Rest des Beitrags lesen »
The New York Stock Exchange. The company’s shares are up nearly 60 percent since it went public.
SAN FRANCISCO — It sounds like heresy around here. But here goes: Is this another tech bubble?
Back East, the Wall Street money is starting to worry that it feels like 1999 all over again. Money-losing technology companies are going public at you’ve-got-to-be-joking prices. The founders of Snapchat are getting multibillion-dollar offers — and turning them down. And the Nasdaq composite index, a visible symbol of the ’90s dot-com boom and bust, is a sneeze away from 4,000, a level it last reached just before, well, you know.
It this time different? Out in Silicon Valley, many insist it is. But for the average investor, there are reasons for caution. Den Rest des Beitrags lesen »
The difference between genius and stupidity is that genius has its limits.
– Albert Einstein
Genius is a rising stock market.
– John Kenneth Galbraith
Any plan conceived in moderation must fail when circumstances are set in extremes.
– Prince Metternich
You can almost feel it in the fall air (unless you are in the Southern Hemisphere). The froth and foam on markets of all shapes and sizes all over the world. It is an exhilarating feeling, and the pundits who populate the media outlets are bubbling over with it. There is nothing like a rising market to help lift our mood. Unless of course, as Prof. Kindleberger famously cautioned (see below), we are not participating in that rising market. Then we feel like losers. But what if the rising market is … a bubble? Are we smart enough to ride and then step aside before it bursts?Research says we all think that we are, yet we rarely demonstrate the actual ability. Den Rest des Beitrags lesen »
Source: Project Syndicate, Robert Shiller
NEW HAVEN – You might think that we have been living in a post-bubble world since the collapse in 2006 of the biggest-ever worldwide real-estate bubble and the end of a major worldwide stock-market bubble the following year. But talk of bubbles keeps reappearing – new or continuing housing bubbles in many countries, a new global stock-market bubble, a long-term bond-market bubble in the United States and other countries, an oil-price bubble, a gold bubble, and so on.
Nevertheless, I was not expecting a bubble story when I visited Colombia last month. But, once again, people there told me about an ongoing real-estate bubble, and my driver showed me around the seaside resort town of Cartagena, pointing out, with a tone of amazement, several homes that had recently sold for millions of dollars. Den Rest des Beitrags lesen »
We’re being told that – thanks to technological advances like hydraulic fracturing and horizontal drilling – the US is undergoing an energy revolution, leading us in a few short years to become once again the world’s biggest oil producer and an exporter of natural gas. According to the Oil & Gas Industry and their proponents, “fracking” will provide the US with energy security, low energy prices for the foreseeable future, more than a million jobs, and economic growth.
“There’s no doubt that we’re seeing an industrial revolution… taking place because of the shale revolution.” –Ed Morse, Global Head of Commodities Research at Citigroup
“We have a supply of natural gas that can last America nearly 100 years, and my administration will take every possible action to safely develop this energy.” –President Barack Obama
“[The Utica Shale is] the biggest thing economically to hit Ohio, since maybe the plow.” –Former Chesapeake Energy Corp. CEO Aubrey McClendon
“[The surge of U.S. oil and gas production] is the biggest change in the energy world since World War II.” –Fatih Birol, Chief Economist at the International Energy Agency
“Many people in the oil industry were skeptical [that we had reached peak oil], and the extraordinary recent expansion of unconventional gas and oil production in North America proved the optimists to be correct.” –Christof Rühl, Group Chief Economist at British Petroleum
Pointing to record low natural gas prices and increased production, policymakers and the media on both sides of the political aisle, as well as investors and utilities, have bought the hype and are shifting their plans and proposals with the expectation that the shale revolution is here to stay.
Five years into the Long Slump it almost seems as if we are back to square one.
China is sufficiently alarmed by the flint hardness of its “soft-landing” to talk up trillions of fresh stimulus. The European Central Bank is preparing to print “whatever it takes” to save Spain and Italy. Markets are pricing in an 80pc chance of yet more printing by the US Federal Reserve in September or soon after.
The world remains in barely contained slump. Industrial output is still below earlier peaks in Germany (-2), US (-3), Canada (-8) France (-9), Sweden (-10), Britain (-11), Belgium (-12), Japan (-15), Hungary (-15) Italy (-17), Spain (-22), Greece (-27), according to St Louis Fed data. By that gauge this is proving more intractable than the Great Depression.
Some date the crisis to August 9 2007, the day it became clear that Europe’s banks were up to their necks in US housing debt. The ECB flooded markets with €95bn of liquidity. It seemed a lot of money then. The term “trillion” was still banned by the Telegraph style book in those innocent days. We have since learned to swing with the modern dance music from central banks.
For me, the defining moment was twelve days later when yields on 3-month US Treasury bills to crashed from 3.76pc to 2.55pc in just two hours. At first we thought it was a mistake, a screen glitch. Nothing like this had happened before, not during the crashes of 1929 or 1987, or after the Twin Towers attack on 9/11.
Investors were pulling money out of America’s $2.5 trillion money market industry in panic. This was the long-feared heart attack in the credit system, even if the economic malaise behind it did not become clear for another year. Den Rest des Beitrags lesen »
In waking a tiger, use a long stick.– Mao Tse-tung
Well, it looks like it could finally be happening. The Chinese housing bubble could well be bursting right before our eyes.The bubble has long been present for all to see, with news reports popping up earlier this year about ‘ghost cities’ and ‘ghost malls’. Indeed, it’s been so visible and so well observed that even the mainstream media picked up on it. That’s right, folks… you heard me right: the mainstream media picked up on it! God, it must be serious!People have been calling the bursting of this bubble for a while now. But this is the first real indication I’ve seen that this particular house of cards – excuse the pun – is beginning to topple.On Sunday Gordon G. Chang over at Forbes noted:“Residential property prices are in freefall in China as developers race to meet revenue targets for the year in a quickly deteriorating market. The country’s largest builders began discounting homes in Shanghai, Beijing, and Shenzhen in recent weeks, and the trend has now spread to second- and third-tier cities such as Hangzhou, Hefei, and Chongqing. In Chongqing, for instance, Hong Kong-based Hutchison Whampoa cut asking prices 32% at its Cape Coral project. “The price war has begun,” said Alan Chiang Sheung-lai of property consultant DTZ to the South China Morning Post.”Conservative estimates say that property prices in China will fall by 10% next year, while some, such as Cao Jianhai of the Chinese Academy of Social Sciences, see potential price falls of 50%.So, why did this bubble inflate and what will be the consequences if it deflates?Dude, where’s my communism?We could look at the superficial reasons as to why the bubble inflated – you know, the usual non-story of low interest rates and a boom in bank lending. Den Rest des Beitrags lesen »