2019-11-13

Rehypothecating Excavators

Rorschach test of your China view.

Is China in a building boom or is construction equipment being sold on credit or is it being bought on credit and rehypothecated for bank loans?

Caixin: Sales of Chinese-Made Excavators Hit Record Even as Economic Growth Slows
Sales of excavators by Chinese manufacturers have hit a record high this year as the central government ramps up efforts to bolster the country’s slowing economic growth by boosting infrastructure spending.

From January to October, 25 manufacturers in China sold 196,222 of the dirt-moving machines, which are essential for large construction projects, according to data (link in Chinese) released Friday by the China Construction Machinery Association (CCMA), an industry group. It was an increase of 14.4% year-on-year, although well below 52.5% growth (link in Chinese) for the same period in 2018. About 89% of the excavators, or 174,680, were sold in the domestic market.
I could be wrong about which way the Chinese economy goes, particularly in the short-term, but this is not good news for the health of the Chinese economy. In the best case scenario, it's a stop gap measure that helps the economy until a real recovery or positive black swan comes to bail out the global economy. There are no other good scenarios.

Latin American Currencies Ready To Stumble

All clear for global markets or are Latin American currencies about to light the next phase of the dollar bull market?

Bonus chart USDCNH.

2019-11-12

Civil War Makes It Into Mainstream Publication

What has been obvious for years, more like decades, is now being understood by mainstream publications. America is on a seemingly irreversible trend towards either a major political fracture or a civil war, or both.

The Atlantic: How America Ends
Today, a republican party that appeals primarily to white Christian voters is fighting a losing battle. The Electoral College, Supreme Court, and Senate may delay defeat for a time, but they cannot postpone it forever.

...The right, and the country, can come back from this. Our history is rife with influential groups that, after discarding their commitment to democratic principles in an attempt to retain their grasp on power, lost their fight and then discovered they could thrive in the political order they had so feared. The Federalists passed the Alien and Sedition Acts, criminalizing criticism of their administration; Redemption-era Democrats stripped black voters of the franchise; and Progressive Republicans wrested municipal governance away from immigrant voters. Each rejected popular democracy out of fear that it would lose at the polls, and terror at what might then result. And in each case democracy eventually prevailed, without tragic effect on the losers. The American system works more often than it doesn’t.
The problem is what is America becoming? More like Nazi Germany or Soviet Russia. The North and South had competing visions for America, but they were a common group of elites who shared a history, language, much culture and religion. Today, that is not the case.

Campus culture points to extreme racial hatred becoming the norm in corporations and government. Political correctness was a joke in the 1990s, it was an oddity. Today, it is mainstream culture. Thus any hope that moderate Republicans or moderate Democrats can find a new middle, must be tempered by the reality that American universities are a modern-day Hitler Youth or Maoist indoctrination centers, churning out hate at an industrial scale.
I went to Williams for a year before transferring because it was so bad I became severely depressed. It’s worse than you can even imagine. Literally every single class I took had an anti-white, anti-christian professor and agenda.

Economics? We discussed the racist wealth gap & how minorities poverty was due to institutional & structural racism. History of early modern Europe? We did a whole chapter on “minority voices during the slave trade.”
Apart from the anti-white agenda in the entire curriculum, it seeped through into the general discourse and atmosphere on campus as well. There was a gigantic mural of Trayvon Martin hung on the student center...

Despite the school bending over backwards to accommodate every single brown person's desire, they still felt oppressed & launched a “police brutality” campaign against our campus security officers claiming they were being harassed & abused by these half-asleep fat 70 year-olds.

When high schoolers toured the campus, they put up a gigantic mural of all the black people currently attending saying why they should come to Williams. Also, they hung fliers around campus explaining how every protected class would be welcomed to Williams.

Unsurprisingly whites were not given a reason to be welcome despite making up over half of the student body. I forget what it said but it was something along the lines of “black people, you will not be shot by police here.”
The melding of identity with ideology will be the Rubicon for a united American polity.

Sunspots, Wheat and USD

2019-11-11

China Money Supply Contracts in October, Matching Year-Ago Dip

M2 growth was 8.4 percent yoy in October as it fell 0.34 percent for the month, same as in October 2018.
TSF stock was similarly flat at 11 percent growth. The PBoC website says 10.4 percent (a significant slide towards the 10 percent area that accompanied deteriorating data earlier this year), but it's 11 percent based on their reported 2018 data.

Shenzhen Abolishes Luxury Real Estate Tax

iFeng: 深圳取消豪宅税,已有业主捂盘跳价…影响到底有多大?看7问7答
Buying a house and moving hundreds of thousands of "luxury tax", is this day to end? Shenzhen has adjusted the standard of “luxury line” for ordinary housing from today, so that the taxes and fees for most second-hand housing transactions will be greatly reduced.

"From today, the value-added tax standard for second-hand housing transactions in Shenzhen is adjusted. The new levy standard is for residential houses with a plot ratio higher than 1.0 and a building area of ​​144 square meters. The value-added tax is exempted for two years." Shenzhen Local Taxation Bureau 12366 staff The brokerage Chinese reporter said.

Subsequently, the Shenzhen Taxation Bureau also responded to this news and said it is true.

Shenzhen Housing and Construction Bureau also officially responded, "A few days ago, Shenzhen City adjusted the standard of ordinary commodity housing to: parcel floor area ratio of 1.0 or more and housing construction area of ​​144 square meters or less. This is insisting that the house is used to live. It is not used to speculate, to implement the national tax reduction and reduction spirit, and to take full account of the reasonable housing consumption of ordinary residents.

The staff of Lejia Real Estate said that when colleagues took customers to pay taxes and paid taxes, they could not be brushed out. He also said that after hearing the news, some owners have already sold their houses.

Swine Flu Wave Two, Three Underground Vaccines Widely Used

Winter seems to be slowing the spread of swine flu in the north, but there's a rebound of infections in the south. Swine herds, including sows, are still declining nationally.

财新: 特稿|养猪业复产艰难 疫情第二波疑现地下疫苗
Pigs are still decreasing. According to data released by the Ministry of Agriculture and Rural Affairs on October 14, the number of live pigs in 400 monitoring counties in September 2019 decreased by 3% from the previous month, down 41.1% year-on-year; the number of capable sows decreased by 2.8% from the previous month and decreased by 38.9%. This is the third consecutive month of decline in national pig stocks after a non-defeating outbreak.

  The good news is that in the north, the savage African swine fever virus seems to have died down. According to data from the Ministry of Agriculture and Rural Affairs, the number of live pigs in the seven provinces of Liaoning, Shandong, Heilongjiang, Hebei, Shanxi, Gansu and Jilin increased by more than 3% in September, and eight in Gansu, Ningxia, Heilongjiang, Shandong, Tianjin, Shanghai, Beijing and Liaoning. The province's ability to breed sows increased by more than 3%. From a regional perspective, the growth of pigs in the northeast, north, northwest, and parts of the Central Plains has declined.

  However, the southern region is still in the process of bottoming out. On July 14th, Guotai Junan reported that according to Xinmu.com, as of the end of June this year, compared with the number of pigs released in 2018, the national median pig production capacity was 50%, of which Guangdong, Guangxi, Anhui and Jiangsu decreased respectively. 70%, 75%, 70% and 85%.

  What is worrying is that after entering the hot and humid summer, the African pig swine, the number one pig killer, has made a comeback in some areas.
Many farmers aren't waiting for the government sponsored vaccine which is in clinical trials. They've opted for one of at least three underground vaccines.
On September 10, the Chinese Academy of Agricultural Sciences announced that the African swine fever double gene deletion vaccine has completed laboratory safety assessment and effective trials and is about to enter the clinical trial phase. However, many insiders told Caixin reporter that due to the fierce epidemic, the underground vaccine, which has not reached the commercial maturity, is also popular in the industry when the official vaccine is still in the pilot stage. At present, there are at least three kinds of “black market seedlings” in circulation. .

  The aforementioned Jiangsu veterinary experts also said that according to his understanding, the use of underground vaccines is very large. In June and July, large pig enterprises began to use, inoculated with millions of pigs, and pig farms with negative detection of nucleic acid in Africa. The vaccine can achieve a protection rate of at least 70%, but the vaccine itself is very low in safety and can directly cause pig skin necrosis, pig death, sow abortion, abortion rate of 4%-8%; In the farms where the nucleic acid test was positive, the vaccine mortality rate was extremely high and almost disappeared.

All is Well: Regulators Deny Forced Mergers to Stabilize Banking System

Caixin: China Is Said to Mull Wave of Bank Mergers to Bolster Stability
Chinese authorities are considering a sweeping package of measures to shore up smaller lenders, escalating efforts to contain one of the biggest risks facing the world’s largest banking system.

Problematic banks with less than 100 billion yuan ($14 billion) of assets would be urged to merge or restructure under a plan being discussed by financial regulators, people familiar with the matter said. Local governments would be held responsible for dealing with troubled lenders, with the central bank providing liquidity support if necessary, the people said, asking not to be identified discussing private information.
Later in the day, also from Caixin: Banking Regulator Denies Sweeping Plan to Force Mergers
Zhou Liang, a vice chairman of the China Banking and Insurance Regulatory Commission, told Caixin on Sunday the regulator would instruct some small banks to shrink their interbank businesses and those outside their registered region and industry. But he said it would be impossible to take the kind of comprehensive measures reported.