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Dow up on news from China?
Old 03-05-2013, 09:39 AM   #1
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Dow up on news from China?

Hi,

Did everyone miss the 60 min show about china's housing bubble? Pretty scary stuff...whole cities new but vacant...high rise apartments, malls..the works vacant.

Bob
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Old 03-05-2013, 09:42 AM   #2
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I suspect this is not news to Mr. Market and, if it is a factor in future economic expectations, it has already been priced into it.
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Old 03-05-2013, 09:42 AM   #3
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Here's a video link: China's real estate bubble - 60 Minutes - CBS News
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Old 03-05-2013, 09:57 AM   #4
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The pictures were quite remarkable to me. This is not really new news but the scale of the problems is pretty amazing when shown on TV.

I notice that China only accounts for 4.5% of my broad index fund International Fund (VEU). But will this slow moving train wreck affect other markets?

It will probably cause the families who bought up the apartments to cut back on consumption as they appreciate that their investments will not pan out. This could then reduce China's willingness to import and open up their markets as the leadership tries to patch things up. It could cause a huge upheaval in the country which could lead towards more democracy or the opposite. Who really knows?

Don't quite understand the premise of the OP's thoughts on the Dow. Our recent market strengths have little to do with China I would think.
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Old 03-05-2013, 10:18 AM   #5
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Don't quite understand the premise of the OP's thoughts on the Dow. Our recent market strengths have little to do with China I would think.
If anything, I'd think the market would worry about this, not celebrate it. More and more of the economic growth in the major corporations that make up the US large cap market are more and more dependent on growth in emerging markets. The earnings growth Wall Street demands is sure as hell isn't coming from the US or most of the EU.
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Old 03-05-2013, 10:32 AM   #6
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Dow is up on on the news that Dow will be up tomorrow. It is called "inflating the bubble", i.e. when people invest because they are afraid to miss the opportunity to invest. At that point people don't care about China, and other minor nuances, like earnings, economy, etc.
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Old 03-05-2013, 10:34 AM   #7
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Dow is up on on the news that Dow will be up tomorrow. It is called "inflating the bubble", i.e. when people invest because they are afraid to miss the opportunity to invest.
Yes, when there is "irrational exuberance (think stocks in 1998 or housing in 2006), people can spin almost everything into a bullish interpretation, and when there is extreme fear and blood in the streets (late 2008/early 2009), those same events are explained in very bearish terms.

In the end, it usually pays to be a contrarian!
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Old 03-05-2013, 10:46 AM   #8
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Just goes to show how irrational mr market is and why nobody can predict what the market will do
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Old 03-05-2013, 11:29 AM   #9
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If anything, I'd think the market would worry about this, not celebrate it. More and more of the economic growth in the major corporations that make up the US large cap market are more and more dependent on growth in emerging markets. The earnings growth Wall Street demands is sure as hell isn't coming from the US or most of the EU.
+1 It was a pretty scary view -- miles and miles of empty condos, people fighting to invest in vacant real estate. Wow. Every time I hear about the Chinese eating our lunch I think about the paper USSR tiger of the late 20th century. Russia made it's transition without a lot of the global economic horror stories we entertained while the walls were coming down. But if China implodes -- it is Katy bar the door.
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Old 03-05-2013, 11:50 AM   #10
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Weren't we worried Japan was going to own us in the eighties?
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Old 03-05-2013, 06:56 PM   #11
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I saw it and could not believe what I was seeing. I have never heard of whole cities, shopping malls and apartments being built and no one lives there. It made me extremely nervous. We live in a global society and if their house of cards fall down, I could definitely see it affecting our stock market.
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Old 03-06-2013, 03:06 AM   #12
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I read somewhere that the prices of scrap metals as copper, brass, and steel are all at the level they are now because of the demand in china. all these components to construction have risen dramatically in the last few years because of china's bubble. It was a scary thing to see and what was scarier yet in the interview the real estate person said the average daily wage was about 2 dollars and that the people buying these apartments could not afford to live in them.
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Old 03-06-2013, 06:27 AM   #13
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I saw it and could not believe what I was seeing. I have never heard of whole cities, shopping malls and apartments being built and no one lives there. It made me extremely nervous. We live in a global society and if their house of cards fall down, I could definitely see it affecting our stock market.
+1 But I'm not sure how much of an impact the house of cards falling down on the other side of the world would have on us - some for sure but how much I can't fathom.
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Old 03-06-2013, 06:53 AM   #14
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+1 But I'm not sure how much of an impact the house of cards falling down on the other side of the world would have on us - some for sure but how much I can't fathom.
My take too. A little, a lot? Who the F knows. But those ghost towns are eerie. The Chinese middle class apparently have no place they can invest their earnings other than a volatile Chinese stock market that scares them and real estate that they should be more scared of but are not. Go figure.
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Old 03-06-2013, 09:13 AM   #15
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There are some "Web Extras" from 60 Minutes towards the bottom of this link: China's real estate bubble - 60 Minutes - CBS News

Those shorts are good viewing too.
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