Posts filed under “Think Tank”

Trichet steps up the US$ rhetoric

In likely the most pointed, direct message given to the US government in a while on the direction of the US$, ECB Pres Trichet said yesterday, “It is extremely important that the US authorities, including the Treasury, the Secretary of the Treasury and the chairman of the Fed would pursue policies that take into account the fact that a strong dollar is in the interest of the US.” He’s basically telling us that the burden of having the reserve currency of the whole wide world deserves better behavior and we better start acting more responsibly as the policies currently pursued that is resulting in the “excess volatility” of the US$ “is an enemy from the standpoint of the stability and prosperity of the global economy.” My updated earnings scorecard has 86% of companies beating EPS estimates with only 57% exceeding revenue forecasts. IP, consumer confidence and TIC data are all out today.

Category: MacroNotes

The China Files (Special Project): Real Estate

Today I offer you an insightful look at China’s real estate market – a “burgeoning bubble” that deserves a close eye as the possibility for breaking increases. Remember the chaos in Japan after their own housing dreamscape got violently yanked back to earth? As investors, we have to recognize opportunities – and know what to avoid. With a global economic crisis – and now surging housing prices in China – investors in any global market need to keep watch on political and economic developments around the world.

Today’s analysis comes courtesy my friends at STRATFOR, a global intelligence company. They provide unique and on-the-money analysis and forecasts on all things global, essential for any alternative investment strategy. They’ve got a free newsletter as well, for which I encourage you to sign up by clicking here – so you’re not limited to my caprice.

John Mauldin
Editor, Outside the Box

The China Files (Special Project): Real Estate

October 13, 2009 | 1149 GMT


The real estate market in China, particularly the residential side, is a burgeoning bubble that is growing bigger and more breakable by the day. Land and housing prices were already rising steadily when Beijing’s stimulus package hit the sector in early 2009. Now prices are surging, with developers, bureaucrats and investors cashing in while urban Chinese – once encouraged to invest in home ownership by the central government – become less and less able to buy.

Editor’s Note: This analysis is part of a series that explores China’s industry, finance and statistics.


Related Special Topic Page

The China Files (Special Project)

PDF Version: Click here to download a PDF of this report

On Sept. 10, China Overseas Land and Investment, a Hong Kong-listed company and a subsidiary of state-owned China State Construction Engineering Corp., purchased a prime piece of real estate in the Putuo district in downtown Shanghai. The company paid 7.006 billion yuan ($1.026 billion) for the undeveloped property, which will amount to an average of 22,409.3 yuan ($3,283.9) per square meter of floor space (just in land costs) once the designed residential building is constructed.

The purchase created China’s newest “land king,” a term for the real estate developer who pays the highest price for a piece of real estate during a land auction. And 7.006 billion yuan was the highest price ever paid for a piece of Chinese real estate for any purpose – residential or commercial. The milestone is a result of an increasingly intense competition for land in major cities that began early in the year, when Beijing began distributing stimulus money to various industries – including the real estate sector – to sustain the economy. As a result, land prices have soared throughout China. And with increasing speculative investment in residential real estate, the market faces a surging bubble that jeopardizes the country’s long-term economic development.


Since 1998, real estate investment in China has accounted for more than 10 percent of the country’s gross domestic product (GDP), compared to only 3 percent to 5 percent in the United States. Such investment is also closely associated with many other industries, such as construction and finance, and it provides an abundance of jobs. Therefore, it is seen as a critical pillar of China’s economy and enjoys favorable policies from the government and state-owned banks (more than 70 percent of real estate investment in China comes from bank loans). At the same time, real estate developers, local government officials and investors have escalated housing prices across the country by acquiring massive land holdings, limiting the supply and inflating prices, creating a real estate bubble that is not sustainable in the long run.

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Category: Think Tank

Fed funds futures believe the doves but the consequences are

Following dovish comments on Tuesday from the Fed’s Vice Chairman Kohn and further confirmed in yesterday’s FOMC minutes from the Sept meeting, the Fed’s easy for longer policy is reflected in today’s fed funds futures where the odds for a 25 bps hike by the April meeting are now at the lowest level in this…Read More

Category: MacroNotes

The King Report: Looking at JP Morgan Earnings

> JP Morgan reported better than expected earnings due to fixed income revenue jumping to a record $5B (vs. -$3.6B). Earnings are $3.59B. Once again the usual suspects hailed JPM’s “fortess-like balance sheet”. Few on The Street or in government want to talk about JPM’s humongous, $80 trillion notional value derivative book. Did any Street…Read More

Category: Earnings, Think Tank

Philly Fed not as robust as the Empire

The Philly Fed manufacturing survey did not follow the big upside in the NY data, coming in .5 point less than expected at 11.5 and it fell from the Sept level of 14.1. It is though positive for a 3rd month for the first time since ’07. There was improvement in three key components, New…Read More

Category: MacroNotes

Lotta data

The October NY manufacturing survey blew past expectations, coming in at 34.6, twice the forecast. It’s the highest level since May ’04. The number only measures the direction of improvement, not the degree so don’t extrapolate that we are partying like its May 2004 but there is no question today’s figure was impressive. New Orders…Read More

Category: MacroNotes

As seen for Q2, earnings season is great but revenue season is mixed

Earnings season continues to be excellent relative to expectations while revenue season is mixed, the same theme as seen in Q2. Based on my little earnings cheat sheet, 18 of 20 co’s have beat earnings estimates while only 10 have exceeded revenue estimates. All in one day today we get information on the labor market,…Read More

Category: MacroNotes

FOMC minutes, easy for longer but is the fire still raging?

The minutes from the FOMC Sept meeting didn’t reveal much in terms of gaining any clues of when they might raise interest rates in light of their more optimistic view of the economy in terms of expecting 2nd half improvement that they expect to continue into ’10. Based on their still sanguine view of inflation…Read More

Category: MacroNotes

DJIA 10,000, let’s reminisce

With the DJIA approaching 10,000 again, let’s reminisce about 1999, the year it first passed that magic level on March 29th. Millennium by the Backstreet Boys was the best selling album, American Beauty won the Academy Award, the Euro was established, SpongeBob SquarePants aired for the first time, Hugo Chavez was elected President of Venezuela,…Read More

Category: MacroNotes

FOMC Meeting Comments

FOMC Minutes (September) > Minutes from September’s meeting will reveal a wide range of views on the FOMC regarding the timing of the central bank’s withdrawal of the monetary stimulus. Some policymakers have lobbied for the central bank to begin tightening aggressively soon. Others, including Fed Chairman Ben Bernanke, appear to want to proceed with…Read More

Category: Federal Reserve, Think Tank