I am assuming that John Paulson, one of the most well-known and successful hedge fund managers around, is not a reader of this blog. In a previous post, I questioned his strategy of buying land and expecting the real estate market to recover. If you’ve been following the data lately, you know that the real estate market continues to decline.
But John Paulson may have more pressing losses to deal with:
John Paulson, who holds a significant long position in gold and gold mining stocks, suffered a heavy hit to his portfolio when Sino-Forest (TRE.TSX) plummeted following accusations from Muddy Waters Research that the company overstated its timberland holdings in China’s Yunnan province.
Paulson’s Funds own 34,714,300 shares, or 14% of the outstanding of Sino-Forest. The stock remains halted after sinking 25% yesterday to C$14.46. Shares of Sino-Forest are indicated at C$6.75, off over 50% versus its previous close. The hit to Paulson would be in excess of $500 million.
Falling land prices may prompt Chinese property developers to write down the value of their assets, forcing a sober reassessment for those with vast land holdings, according to a survey released Monday by Credit Suisse.
Most at risk are those mainland Chinese and Hong Kong developers who added aggressively to their land banks in 2009 and 2010, the prices of which could come under pressure amid Beijing’s ongoing credit tightening, the investment bank said.
The findings were part of a poll of both listed and unlisted companies conducted by an independent research company and commissioned by Credit Suisse.
Prices for land sold at auction were down 20% so far this year, the report cited one industry expert as saying. Other data indicated price declines of up to 50% for the year to date, although the figures were affected by slumping transaction volumes in cities such as Beijing, possibly overstating the true rate of declines, the report said.
Story continues here…
I’ve written before about the Chinese bubble. Nobody knows when this bubble will burst or deflate, but it will. And now that China is such a major player, it will drag down economies around the world.
With all the talk of inflation, China is experiencing a deflation problem. Marketwatch reports:
China is urging major supermarkets to boost vegetable sales and encouraging farmers to bypass middlemen and market produce directly, in a bid to curb a steep slide in prices that is hurting farmers’ incomes, the Ministry of Commerce said in a statement.
Twelve major supermarkets, including Wumart Stores Inc., have agreed to boost sales, the ministry said. The China Daily newspaper said Thursday Wal-Mart Stores Inc. and Carrefour SA are also involved in the effort.
The ministry has also set up a “work group” to maintain prices at a “reasonable” level.
Its statement Wednesday underscores the difficulties the government faces in controlling volatile prices. The impact of an official push last year to raise vegetable output appears to be unraveling now, amid overproduction and clogged distribution lines.
Vegetable prices have fallen 21% in a month and 5.9% from a week ago, the ministry said.
The sharpest declines were seen in green pepper, which fell 20.9% from a week ago, and cabbage, chili pepper and lettuce, which fell 12%, 8.9% and 8.1% respectively.
In contrast, grain, pork, beef, metals and rubber all continued to post small increases of between 0.2% and 1.7% from a week ago.
Last year, the Ministry of Agriculture pushed farmers to raise vegetable acreage by 7% and production by 7.5%, following almost three years of little to no growth in the sector.
The directive was part of wider efforts, including price caps on cooking oil and flour, to curb a surge in food prices.
Worldwide commodity inflation has been driven, in part, by demand from China. Are these price corrections the first sign that the Chinese bubble has popped and that inflation will turn to deflation as Chinese demand evaporates?
China is boosting their determination of poverty to an annual income of $229.30. In the United States, the poverty level is $10,890.
So a poor person in the U.S. makes nearly 50 times as much money as a poor person in China. Additionally, American poor get all sorts of free services (subsidized public transportation, welfare, libraries, food stamps, etc.) from the government that the Chinese poor do not receive.
In fact, China’s per capita GDP is just $4,382. An American living in poverty has higher income than the average person in China.
Great chart showing improving energy efficiency around the world.
via No Money No Worries
The Washington times reports that NASA’s laboratory head James Hansen is:
Citing the Chinese government as the “best hope” to save the world from global warming. He also wants an economic boycott of the U.S. sufficient to bend us to China’s will.
“I have the impression that Chinese leadership takes a long view, perhaps because of the long history of their culture, in contrast to the West with its short election cycles. At the same time, China has the capacity to implement policy decisions rapidly. The leaders seem to seek the best technical information and do not brand as a hoax that which is inconvenient.”
“After agreement with other nations, e.g., the European Union, China and these nations could impose rising internal carbon fees. Existing rules of the World Trade Organization would allow collection of a rising border duty on products from all nations that do not have an equivalent internal carbon fee or tax.”
“The United States then would be forced to make a choice. It could either address its fossil-fuel addiction … or … accept continual descent into second-rate and third-rate economic well-being.”
Does Mr. Hansen really believe Chinese totalitarianism is better than American democracy? Does he really support an economic boycott of his own country? And what is the source of his ideology? Does he really favor these positions because it would help the environment? Or is he just interested in political power?
I’m not sure which is worse: 1) a demagogue using the environment to control the country or 2) an ideologue who is willing to adopt a political system responsible for death and destruction to save the environment.
I must thank James Hansen for his comments. He is showing the world what the “experts” in global warming really want: to control us.
I previously wrote that “China has surpassed the United States as the lender of last resort.” Now, there is more evidence for this:
China is confident Spain will recover from its economic crisis and Beijing will buy Spanish public debt despite market fears of an Irish-style bailout, a top Chinese official said Monday.
The comments by Vice Premier Li Keqiang were made in an op-ed piece in Spain’s leading daily El Pais one day ahead of his arrival in Madrid for a three-day official visit, the start of a European tour that will also include Britain and Germany.
“Since China is a responsible investor country in the long-term on the European financial markets, and in particular in Spain, we have confidence in the Spanish financial market, which has been translated into the acquisition of its public debt, something we will continue to do in the future,” he said.
“China supports the measures adopted by Spain for its economic and financial readjustment, with the firm conviction that it will achieve a general economic recovery”, said Li, who is widely tipped to become China’s next premier.
It remains to be seen if this is good or bad. If China acts responsibly and withdraws their support if Spain fails to hold to their austerity measures, China is simply helping Spain avoid steps necessary to fix its mess and encouraging other countries to act irresponsibly too. But if China really forces Spain to cut back on its deficit spending, this could provide Spain the temporary support it needs to get its fiscal situation back on track.
My major concern is that China is still controlled by a ruling class that has its own interests in mind more than the economic well-being of the Spanish. China would hate to see the world economy decline and has every reason to prop it up. China figures that every year it can grow faster than the rest of the world, it becomes all that much more important and powerful. A collapse in the worldwide economy now would take China down with it before the country has a chance to flex its muscles. China would rather prop up the world for another ten years, by which time its power will have grown immensely.
Or I could be over-analyzing things. China could be making an investment and, if correct, a very profitable one. But with China’s secretive government, one never knows what they are really thinking.
It is already well known that the United States is poised to lose its status as the world’s largest industrial producer for the first time 110 years. In 2011, China will become #1.
But China is also poised to claim another, possibly more important crown. China will become the world’s lender and investor of last resort, a title the United States has held since the end of World War II. Mail Online reports:
China has said it is willing to bail out debt-ridden countries in the euro zone using its $2.7trillion overseas investment fund.
In a fresh humiliation for Europe, Foreign Ministry spokesman Jiang Yu said it was one of the most important areas for China’s foreign exchange investments.
The country has already approached struggling European countries with financial aid, including offering to buy Greece’s debt in October and promising to buy $4billion of Portuguese government debt.
As China passes the United States in another key measure, let’s look at the bright side: We can let China lose money bailing out insolvent countries and not waste our own.