Epic default cycle accelerating in China

Former Fitch credit analyst Charlene Chu was one of the first to warn of rising risks in China’s shadow banking system.  Chinese banks have been concealing risky credit in ‘off balance sheet vehicles’ (same accounting tricks that bankrupted Enron and Worldcom et al).

The chart below offers a big picture of the Chinese debt explosion since 2007 even on the understated officially reported numbers.  Chu believes that bad debt in China is some $6.8tn above these official figures as the government has propped up the appearance of growth and allowed underlying problems to go unchecked.  See: Prominent China bear warns of $6.8 trillion in hidden losses.

“Ms Chu said the ability to avoid recognising losses allows problems to fester for longer — and grow larger — than in an economy where actors respond purely to market incentives. “What I’ve gotten a greater appreciation for is how everything is so orchestrated by the authorities,” she said. “The upside is that it creates stability. The downside is that it can create a problem of proportions that people would think is never possible. We’re moving into that territory.”

Watch a video report on the topic here and here.

 

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The death and rebirth of rotorcraft commuting

Interesting historical perspective and update on evolving shared transport services using mobile apps and EVTAL (electric, vertical, take off and landing) rotorcrafts.

Fifty years ago, a helicopter company called New York Airways whisked passengers from the rooftop of the iconic Pan Am Building in midtown Manhattan to any city airport in just 10 minutes. A fatal accident in 1977, however, brought the era to an end. 40 years later, new technology could open a new chapter in short-distance airborne commuting. Here is a direct video link.

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Accepting the evolution of transport

Next to housing, transport has been the largest consumer spending item for decades. That is now changing. Understanding and anticipating the transport evolution now underway is a critical piece of navigating the economy and investing landscape today. See more here, The coming transport revolution:

“Clinging to old ideological biases could produce massive investments in obsolescence. In an age of rapid change, vision and adaptation will be more useful than ideology and bias.”

Always has been, always will be.  The fact that most people can only see the past and present and expect the same Ad infinitum, is a catalyst for grave financial errors.

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Canadian realty prices: what soared up, now coming down

The Canadian Real Estate Association reported yesterday that Canadian home sales slipped for a fourth consecutive month. Toronto and Vancouver both saw sales weaken by 41% and 8% year-over-year respectively.

Month-over-month the nationwide decline was 2.1% while Toronto fell 5.4%, Vancouver was down 1.7% and Calgary was down 5.5%.  This is barely a start in the mean reversion due here.

The nationwide benchmark home price declined 1.5 percent to C$607,100 ($476,000) from June, the Canadian Real Estate Association said Tuesday, the largest drop since the previous recession. In Toronto, the country’s largest city, the price fell 4.7 percent on the month.  Here is a direct video link.

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Subprime auto loans the next big short

Broke buyers, desperate to move product-well-past reasonable-demand-manufacturers and dealers,  along with price indiscriminate-desperate-to-dump-capital anywhere ‘investors’ have made a big mess once again. See ‘Deep’ Subprime Car Loans hit Crisis-Era Milestone:

Amid all the reflection on the 10-year anniversary of the start of the subprime loan crisis, here’s a throwback that investors could probably do without.

There’s a section of the auto-loan market — known in industry parlance as deep subprime — where delinquency rates have ticked up to levels last seen in 2007, according to data compiled by credit reporting bureau Equifax.  “Performance of recent deep subprime vintages is awful,” Equifax said in a slide show on second-quarter credit trends.

Also watch this discussion.  Here is a direct video link.

30 year old Portfolio Manager:  “I think auto investors know what they are doing here.” LOL!

Here is the big picture chart on the US consumer credit cycle since 2007.

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Danielle on The Financial Survival Network

Danielle was a guest with Kerry Lutz on The Financial Survival Network talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here.

The sharing economy has not been born solely out of efficiency, it’s also largely a matter of necessity. Declining incomes and profits make it a major money saver for the shrinking middle class. Whether it’s AirBNB for travel, Uber to get where you’re going or Citibikes to use a bicycle in the City, it just makes so much sense. And we haven’t seen anything yet. It’s going to really take off soon once self-driving cars really hit the market.

Here is the Global Dow 150 Index chart that I reference in this discussion as having just retouched its 2007 peak.

Here is earnings per share (in black) showing flat since 2014 ,while the S&P (blue) has increased.

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