On building debt

I am glad to say that the overinvestment thesis is much more widely acknowledged today than it was even two or three years ago, but one myth, I think, is that most of the overinvestment excesses in China are concentrated in the real estate sector. I have always argued that it is infrastructure where the most amount of investment has been wasted

Bubble Trouble in the U.S. Heartland?

The “smart money” has been buying up farmland hand over fist for the past few years and you can see how they helped drive up land prices in the U.S. heartland. Some think this is the place to be if the shit really hits the fan. Not gold, but productive assets that you can eat. Nevertheless, with ag commodities starting to rollover, farmland prices have probably seen their best days.

Jim Chanos on China, Hong Kong and Australia

Famous shortseller Jim Chanos was in Hong Kong and Australia and reported back on what he saw to Bloomberg Television. Copy provided below including a link to the video

The debt-financed investments of Chinese state-owned enterprises

A lot of Chinese SOEs are involved in a very wide variety of business activities, and are especially fond of activities in which cheap capital is the comparative advantage, or in which there is political advantage to be gained. That makes real estate development and “high tech” two of the most popular ancillary businesses. And of course if it is true that SOEs are investing unnecessarily for reasons that have nothing to do with value creation, one consequence is likely to be an increase in debt, as SOEs borrow and invest

Video: Australia on China’s property market and ghost cities

You have seen a few of these videos on ghost malls and ghost cities in China. This one from an Australian broadcast is quite good. It reinforces what I have been saying about the magnitude of non-performing loans and how this constrains Chinese economic policy.

Very sobering

Three eminent domain cases show corporatism in action

So the dialling for dollars campaign is under way in U.S. municipalities. I’m talking about the use of eminent domain laws to dispossess property owners of property in order to make way for luxury facilities. This is an ongoing process I expect to get worse as cash-strapped municipalities figure out how to close budget gaps. There are three recent cases that I want to highlight. But first, here’s some history

Dongguan Ghost Mall And China’s Property Boom

This is what the biggest mall in the world looks like on a typical Saturday, very reminiscent of this Hugh Hendry video of China’s empty skyscrapers and this video of China’s empty city

The Deficit Commission and America’s Neo-feudal Economy

Commercial real estate has been regressively “freed” from debt – leaving the rental value to be pledged to banks as interest. This un-taxing of land rent has been a major factor inflating the real estate bubble on credit, much as deregulating monopolies has helped inflate their stocks and bonds on credit.

This is the policy that the Bowles-Simpson Deficit-Reduction Commission endorses. Its regressive tax proposals would shrink the economy, pushing it further into debt. This transfer of revenue from labor and business to property owners – and from them to their bankers and bondholders – threatens to force up the government’s fiscal deficit (as states and municipalities are seeing today) and turn the United States into a Third World type neofeudal economy

What Goes Up…

by Edward Hugh Spain’s troubled banking sector is back in the news again. Despite the apparently successful stress tests carried out over the summer problems persist, and don’t seem likely to go away soon. Foremost among these is the steady rise in problem loans which have now risen to an all-time high, potentially endangering the

Delay and Pray, and Then?

By Jake Weber While it may be hard to believe, the housing market hasn’t been the worst-performing real estate sector in terms of price. The index for the Case-Shiller Composite-20 index for residential real estate peaked in July 2006, and as of May 2010, the index had dropped by 29.1%. Considering how dismal the recent

Annaly: Soft Economic Data Has Meant Increased Risk Aversion

The July 2010 Monthly Commentary By Annaly Capital Management The Economy The S&P 500 finished June down 5.4%, while Treasuries enjoyed a significant rally. The yield on the 10-year shed more than 30 basis points and ended the month below 3% for the first time since April of 2009. This could be representative of a

The Financial Crisis Is Not Over

The June Monthly Commentary By Annaly Capital Management. The Economy: The financial crisis is not over The Residential Mortgage Market: The tale of "fails" in the mortgage market The Commercial Mortgage Market: Comparing spreads for commercial real estate loans vs. securities The Corporate Credit Market: The return of credit risk The Markets: Sell in May