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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (20000)	12/31/2004 11:50:22 AM
From: yard_man	Read Replies (1) \| Respond to of 116555

I would like to get Faber, Coxe, Richebacher and Rogers all in some kind of panel discussion for expectations regarding 2005. I tend to want to agree with Faber -- but his arguments seem weak to me. Housing bubble could pop at any time, but he can't make a good case as to why now?? I thought it was happening at least twice before and I was wrong. How right is it to look at consumer demand in China as an inidicator for their economy? -- I thought it was about exports. I think a debate between him and Coxe would be especially entertaining.

To: mishedlo who wrote (20000)	1/1/2005 3:37:45 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Mish, I have a question: they all talked about the “hard landing” in China, but none of them mentioned what is their definition of the “hard landing”? from a GDP of 8% down to 6% or down to 4% or what? I read someone (Nicholas Lardy) said that soft landing means only GDP down, and hard landing means both GDP and employment down. Do you agree? Now here is some of my counter argument<g> To start with, car sales, which were growing at 100% year-on-year in some months of 2003, have slowed down considerably. Car sale in China grew >40% in 2002, 71% in 2003, and 20% or so in 2004. The projected growth for 2005 is still 10-15%. Yes, the base number was low in China. Yet, the percentage wise, even if 10-15% growth is perhaps still among the highest in the world. And the growth rate in 2003 was an outlier, that precondition could not be replicated again, and so should be taken out when calculating the trend. I have said it before that GM made tons of money from China in 2003. And here are some data. The car industry in China before 2003 was highly protected for those who manufactured cars in China, such as VW, and GM, among other foreign car makers. This has been done at the cost of the Chinese consumers. In 2003, GM has sold 5.6 million cars in North America, and had an average profit of $145 each (made 812 million). In the same year, GM sold only 386,000 cars in China, with an average profit of $1,132 each (made $437 million). So if auto companies complain their profit in China is down, does that mean the hard landing? No, I don’t think so. They have no reason to make 6-7 times higher profit in China than elsewhere, not to mention those elsewhere are much wealthier nations comparing to China. Methink, if cars are priced right in China, the growth rate could be sustained for quite some years to come. Then, there is the Chinese housing market, which has slowed down considerably. The housing market in Chinese major cities will slow down (I don’t think they have slowed down considerably yet), but the housing market in second and third tier cities still has a lot of room to grow. I read that just in Beijing, there are 4 million new residents. Yes, a lot of them cannot afford those 0.5 – 1 million Yuan high end apartment, but they can sustain the second hand housing market for a long time. From 2005, the central gov. will start to control all the land directly (before this the land was control by local gov.). And the loan will also be pretty tight; these will keep some balance bet. supply and demand. Therefore, with or without the Chinese government's measures to cool the economy, I would have expected capital spending to slow down, because of the over capacities and bloated inventories! How bad are the over capacities in China, and in what field is still hard to say. This coming national economic survey may shed some lights. And this will also depend on whether Chinese gov. is able to redistribute some wealth to the majority rural population and stimulate the demand from them. Moreover, it is far from certain that an economic rebound will take place at all once the government's credit controls are lifted In fact, my view is that capital formation will decline significantly in 2005 and that foreign direct investments will decline far more than is expected I hope he is right on this. So that China can choose a right time to revalue RMB a little bit<g> Just IMHO