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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (109696)	3/9/2011 2:39:11 PM
From: RetiredNow	Respond to of 110194

What happens when China's bubble bursts? It will have an impact on the whole globe, but most notably the US. One more factor that argues against being heavily invested in stocks right now.

To: russwinter who wrote (109696)	3/9/2011 2:52:31 PM
From: GST	5 Recommendations Read Replies (2) \| Respond to of 110194

<The action has all the manifestation of a bursting bubble> "Bubble" means different things in different contexts. Overpriced markets and the conditions that fuel distorted pricing structures can certainly lead to a collapse in pricing -- no shortage of examples, and you know them all already. Real estate is more often than not a highly leveraged commodity. A relatively small price drop wipes out a lot of equity, and then the house of cards can fall apart with astonishing speed. On the other hand, a drop in prices can also signal a slightly less catastrophic bloodbath where speculators get 'killed' by having played the game too long without a good exit strategy. Ditto for the financial organizations who provide the leverage. In the case of China, it seems that the government is targeting the fuel source and the leaders of the price distortion -- speculators and bankers. They might be doing it far too late in the game -- no argument there. But I do not know that really with any degree of confidence. Two things seem nearly certain -- anybody who owns Chinese real estate as an 'investment' should have been out by now or else face the music -- but it never works that way as people always stay way too long at the party. So there will be pain -- a lot of pain. The government is deeply involved in making sure it is painful -- the opposite of America where the government did everything it could to keep the party going. As the outlines of our bubble became evident to one al all, Washington simply ordered a lot more tequila and said 'put it on our tab'. I don't see that in Beijing. In Beijing I see the government saying -- last call was last week, now we are setting up checkpoints to send the drunks to jail to sleep it off. Too little, too late? Yes. The collapse of a bubble ala the US and the rest of the 'free world'? Not so sure. Banks going bankrupt in China? Absolutely. Housing prices tanking -- of course. The sinking of the Chinese economy and the end of the ascent of the RMB -- no so fast -- now you become the speculator.