Invest in Nuclear or Short California Real Estate

The Sacramento Bee: California lawmaker wants to ban gas car sales after 2040
Ting is among the policymakers pushing to increase incentives for drivers to ditch their gas guzzlers. He is also working on legislation that would overhaul California’s electric car rebate program by making more money available for rebates, then ratcheting down the value of those discounts as the state hits sales targets.

“California is used to being first. But we’re trying to catch up to this,” Ting said.

France and the United Kingdom both announced this summer that they would ban the sale of new gas and diesel cars after 2040. India is aiming to get there by 2030. And China said this month that it would stop the production and sale of vehicles powered solely by fossil fuels in the coming years.
I'm not up-to-date on the UK, but India plans to increase nuclear power 9x by 2032 and to generate 25 percent of electricity with nuclear. France gets nearly 80 percent of its electricity from nuclear reactors. China is building them like crazy. In other words, these countries have already built or have started work on the infrastructure needed for electric cars.

Clownifornia, not so much. If they push forward with electrification, they'll have a significant power deficit. Either the state will have sky-high electricity prices, killing the economy and spreading poverty across the state, or they'll pay through the nose to build nuclear as they try to make up for decades of poor planning.


China Rebound or Head Fake? Red Line Approaches

For the past year, a commodities rebound has pointed to a rebound in the global economy. As a skeptic of this growht, I've been wondering how much of the global "rebound" (the data is less bad, not great) was driven by Chinese credit growth and how much was a real turnaround.

Chinese are asking similar questions.

Caixin: Opinion: Is China’s Economy on the Cusp of a New Boom Cycle?
By digging out the cause behind the rally of industrial indicators and looking into China’s growth engines, we think it is premature to draw such a rosy conclusion at this stage.

A closer examination on the increased industrial profits since last year showed that the improvements were not spread out evenly across sectors and various types of producers — specifically, upstream sectors such as coal, metallic metal, oil and gas mining and midstream manufacturers in heavy industry — wherein large state-owned enterprises preponderated, accounting for most of the rebound in profits.

...The varying profitability made sense, for the substantial growth up till now stemmed from China’s “supply-side structural reform,” intended to cut capacity in heavy industry since early 2016. As steel mills and coal mines were shut, supply decreased and price soared.
I'm not sure what this last sentence means, steel production is near record highs. And how about aluminum?

Caixin: Aluminum Prices Surge as China Imposes Curbs
China’s aluminum industry is being hit by a double whammy — forced closures of unapproved plants to curb overcapacity and heavy cuts in production over the winter months to ease choking pollution. But the bad news has been good news for investors, speculators and some companies.

The price of the metal, which is used in a wide range of industries including aerospace, construction and packaging, has surged in domestic markets as speculators anticipated a repeat of the bull market already seen in coal and steel after the government ordered cuts in capacity and output in those industries.

...“The current market boom is not being caused by (changes in) the relationship between supply and demand,” Wang Qiang, an industry insider close to policymakers, told Caixin. “It’s being caused by speculation funded by borrowed money.”
How about those production cuts?
Desperate aluminum producers scaled back output at the end of 2015 in a bid to boost prices, which Antaike described as the “largest cutback in nearly seven years.” As a result, production of the metal rose by only 1.3% in 2016 to 31.87 million tons, collapsing from 2015’s growth rate of 11.3%, NBS data show.

...Production is still outpacing demand, however. In the first half of this year, total output jumped by 20.9%, while consumption only rose by 11.5%, data cited by Chalco show.
China uses the same math as politicians in Washington, where a cut is a reduction in the rate of growth, not an actual reduction. China isn't cutting, it is slowing the buildup of overproduction and inventory in the hopes that a jump started economy will absorb the supply. China is getting worse more slowly than before.

Back to the econ article:
Even though corporate treasurers decide to invest in fixed assets as profits rise further, the credit environment may not be in their favor. China ranked the highest in the ratio of nonfinancial corporate borrowing to gross domestic product (GDP), surging from 99% to 170% since the global financial crisis. As the debt risks drew increasing attention, this year the financial regulatory authorities have strengthened supervision to prevent systematic financial risks. The interest rates rose significantly, resulting in higher costs of financing investment. And there is no sign of loosening monetary policy in the short run.
ng 3.9% and 3.8% respectively, in contrast to 4.6% in June. More essentially, China’s investment-led growth has run out of steam. The proportion of investment in GDP has plummeted from 86.5% in 2009 to around 41% in 2016. Since the global financial crisis, China’s investment has been mainly driven by a booming property market and infrastructure financed by local government debts. But their roles are also fading as the housing market showed signs of stabilizing and Beijing pledged to curb government debts. What matters more: None of these factors is unconventional, which cannot justify a new boom cycle.

...The most important event in China this year will come soon. The National Congress of the Communist Party is expected to convene on Oct. 18. Will it herald a new round of reform in China? Only reform can unleash China’s growth potential. The reform package should include restructuring state-owned enterprises and opening the service sector to genuinely embracing private investment. Allowing private capital to engage in health care, education, communication, etc., is essential to improving social infrastructure and encouraging consumption. Plus, China should promote urbanization and environmental protection in a more market-oriented manner, advancing the transition to a more-sustainable, inclusive growth.


Shift in Social Mood Among Investing Public

Much of the investing public understand that low returns require much lower spending and much higher savings levels. Social mood has shifted from greed to fear, from wanting an early retirement, to wanting any retirement at all. Generation X experienced two stock market crashes and is generally more practical than the Boomer generation. The Millennials watched parents and friends lose their homes during the financial crisis. These are not temporary shifts in attitude. People who lived through the Depression never changed their ways even into the boom years of the 1980s and 1990s.

I've written a lot about the gap between public opinion on issues such as immigration and nationalism versus the established political powers in many Western countries. There's also a massive gap between public understanding of finances and the behavior of the establishment. This could lead to major political upheaval when pension funds fail, or worse, bond markets and currencies, because the public will not accept excuses having adjust their own behavior.

Marketwatch: This person asked the internet if it was necessary to save so much for retirement — the response was surprising
He got his answer. Reddit users took to the platform reminding him of other expenses he’s not considering, such as possible illness, job loss, divorce, a stock market crash, health care and other long-term care planning, and even taking care of parents when they get older (caregiving is not just a physically demanding role, but a financially demanding one).

“Your calculations are figured for perfection,” one user wrote. “Also remember your kids can borrow for college but you can’t borrow for retirement.” They also tore into his estimations — explaining that interest rates are just coming from all-time lows and that there is no guarantee he will see a 6% annual return for the next 40 years. “How does your planning work out if the market returns 3% per year in real terms?”

Other commenters added that there are so many unknowns in the next four decades. “I think it’s good to maximize retirement savings when you can as there may be periods of your life where you’re unable to do so for one reason or another,” SpidermansMom said. People shared personal stories: that user said her husband fell ill and lost his job, and they suddenly went from two salaries to one. He was too sick to watch their son, who stayed in day care, and she couldn’t save as much for retirement, but felt comforted by the fact they had been maxing out their retirement plans for years before.

Another user said his perception of his retirement changed after his dad died at 69 and he realized he’d personally rather have 15 solid years of retirement compared with his father, who only had three. Another shared that his father made $150,000 a year but today is unemployed with no money. “Fortunes change,” user palsh7 wrote. “Don’t assume anything. If you’re still feeling good at 55, by all means, cut back, but right now you want to invest.”


2017 Picks: A Mixed Bag

At the end of 2016 I made a few predictions for 2017.

I thought Turkey and Mexico (TUR and EWW) would decline. I missed the broader emerging market trend and the extent to which the U.S. dollar would correct, although in Turkey's case, the rally is almost entirely driven by equities, not currency.

I thought FCG was a good speculation at the end of 2016 considering it was very cheap relative to the energy sector. I thought it would at least perform no worse than energy, but it underperformed again. Still, it did not hit a new relative low versus SPDR Energy (XLE). FCG's relative low was achieved in early 2016. I still like it as a relative bet on energy for anyone who is bullish on energy. I make no call on the overall energy sector; I currently own November puts on SPDR Energy Exploration & Production (XOP).

I was right on the solar (TAN) call. And the Chinese yuan.
In the near term, the Chinese yuan looks a little oversold. I expect a bit of a rally after it cracks 7, even better if it rallies before since it will catch the bears. A 3 percent rally takes USDCNY to about 6.75, a 5 percent rally to 6.60. The PBoC has given bears nice entry points before, hopefully they provide another one. I don't think USDCNY will be the best currency play.
It ran all the way to USDCNY 6.48 on September 8. On September 10, I wrote: Time to Short the Yuan? USDCNY hit 6.62 today.

Kurds Vote on Independence

More bad news for Turkey.

CNN: Iraqi Kurds cast their votes in historic referendum
Iraqi Kurds have started casting their ballots in a controversial independence referendum Monday as tensions between Iraq's largest ethnic minority and the Iraqi government in Baghdad intensified.

Voting got underway at 8 a.m. local time (1 a.m. ET) and will end at 6 p.m. local time (10 a.m. ET). The first results should be known within 72 hours.

...Both Iran and Turkey have sizable Kurdish minorities and fear a vote for independence in Iraq might galvanize movements in their countries.
One of the more realpolitik solutions for Islamic terror was to blow up the entire Middle East via Kurdish independence, forcing jihadists to fight internally.

TUR broke out of the head-and-shoulders pattern, but it remains in a downtrend. I expect the rally in 2017 will prove to be a headfake.


Third-Tier Cities Tighten Real Estate Regulations

iFeng: 七地发楼市新政 多限新购房再上市
Another wave of market regulation policies, and shift focus from a second-tier cities to second and third tier cities. September 22 to 23 in the afternoon, there have been Nanchang, Xi'an, Chongqing, Nanning, Changsha, Guiyang, Shijiazhuang 7 cities introduce new market regulation policies, Chongqing, Nanchang, Nanning, Changsha, Guiyang, Shijiazhuang 6 cities are new then make a limited purchase of housing on the market, ranging from 2-5 years time.

Asia-Pacific Urban Development Branch President Chen will keep the real estate yesterday in an interview with Beijing News reporter, he said that second-tier cities housing prices rose significantly, intensive introduction of restrictions on sale and other control measures, mainly in order to curb price gains.
Xinhua interprets: 新华社:2天8城楼市调控加码,释放什么信号?
So why these eight cities to be overweight regulation? Industry insiders believe that this round of regulation with a precision, "where prices rose significantly, points to where the regulation."

Reporters noted that this regulation to raise the capital city does not belong to more than 15 first- and second-tier cities hot spots, but recently a new round of price and trading volume rose city. These cities are mostly net inflow of population, there is upward pressure on prices, regulation of further tightening reasonable.

..."To give the market a clear signal that the market regulation will not relax for a period of time, will help guide market expectations." President Yang Research Institute is now home chain collar said.

Keer Rui Research Center analyst Yang Kewei that the impact of policies on the demand side restricted the biggest change is that the previous "urgent urgent buy sell" short-term psychological hold, by reducing transaction frequency, eliminating the short-term profit mentality, in order to curb investment speculative demand, in line with the central "room to live not fried" spirit.

Yang Kewei is expected in the short term, it will result in restricted or down real estate turnover, with elongated period of regulation, the possibility of some local developers to cut prices to take the amount of the increase is expected to more projects will accelerate the market.

Good Political News Peaks In Europe

Germany's high water mark in social mood sees the two major parties losing support and the populists rising. Since CDU refuses to partner with AfD and SPD refuses to partner with CDU, the only possible coalition is between CDU, FDP and Green, the "Jamaica" coalition (named for the three party's colors matching the flag of Jamaica).

This also marks the peak of a string of positive election results since Brexit. The road ahead is much less favorable with Italy on tap and Spain heading towards major internal conflict. The Catalonian indepedence vote is in October. The next big national election is in Italy, where right-wing and populist parties dominate the polling.

Reuters: Italy's 5-Star names youthful new leader as election nears

Guardian: The view from Madrid: anger and sadness as Catalans prepare for vote

Germany held Europe together, but if Merkel is as weakened as she appears, she will have a difficult time forcing austerity on Europe because she will need to keep the Greens happy to stay in power.


AfD Could Become Largest Opposition Party in Germany; Catalonia Crackdown in Spain

Alternative for Germany (AfD) is currently polling in third place ahead of Sunday's election.

German election 2017: Polls and odds tracker as Merkel seeks fourth term as Chancellor

German social mood is among the strongest in Europe, yet the anti-immigration populists are moving into the pole position for opposition against what could be a "grand coalition" between the center-right and center-left parties. When social mood has its next leg down, the centrist parties will collapse and the leading opposition parties will take power.

Meanwhile in Spain, where social mood is already negative, the secessionist movement in Catalnia is spiraling towards Exit.

ZH: Unintended Consequences & Ugly Repercussions: It's Getting Worse In Catalonia
But, as WolfStreet.com's Don Quijones points out Madrid’s crackdown on Catalonia is already having one major consequence, presumably unintended: many Catalans who were until recently staunchly opposed to the idea of national independence are now reconsidering their options.

A case in point: At last night’s demonstration, spread across multiple locations in Barcelona, were two friends of mine, one who is fanatically apolitical and the other who is a strong Catalan nationalist but who believes that independence would be a political and financial disaster for the region. It was their first ever political demonstration. If there is a vote on Oct-1, they will probably vote to secede.

The middle ground they and hundreds of thousands of others once occupied was obliterated yesterday when a judge in Barcelona ordered Spain’s militarized police force, the Civil Guard, to round up over a dozen Catalan officials in dawn raids. Many of them now face crushing daily fines of up to €12,000.
Spain offered some concessions to Catalonia, similar to those given to the Basque region.
Catalans want a new constitution to replace the one adopted in 1978 following the death of longtime dictator Francisco Franco and a statute like the one in place in the northern Basque Country which collects its own taxes and contributes little to Spain's central coffers, Bartomeus said.

Juan Montades, a political scientist at the University of Granada, said that if the rules are changed, Andalusia, Spain's most populous region which benefits from the redistribution of wealth from Catalonia, has warned that it would "be in the front line to defend its interests."
The battle in Spain is strong because Catalonia is wealthy. It is more leftist than the rest of Spain. It also has a long and unique regional history, including local dialect. The last part is the most important for most secessionist movements.

Meanwhile in America, getting a raw deal (or seeing that the future is set) is enough to propel separatist movements such as the American Revolution and Confederacy in 1861. American secession seems laughable with social mood at a bear market peak, but #CalExit is getting off the ground. Many residents in California are foreigners, recent immigrants from all over the world, but mostly from South and Central America. This doesn't create ethnic unity, but it adds a layer of ethnic separation from the rest of the country on top of political and economic issues.

Furthermore, blue states such as California are the strongest opponents of secession and devolution of powers favored by red states. Both left and right will see themselves as winners if California leaves. Although negative social mood and hateful rhetoric will fuel a separation, it is more likely to be amicable given the political background. The risk is that other blue states such as New York threaten to leave as well because the country will move right, and then blue states such as Washington, Illinois, New York threaten to kick out the blue cities such as New York, Seattle and Chicago, turning the states as red as the Deep South.


Beijing Banks Raise Mortgage Interest to 20pc Premium

iFeng: 央行北京营管部:支持北京房贷利率调整
According to Securities Daily informed that since September 14, a number of banks in Beijing the first suite of lending rates continue to rise, after the adjustment, the first suite of mortgage interest rates go up 5% to 10% into the mainstream, while individual banks adjusted to the lowest performing reference interest rates go up 20% of the interest rate policy, there are more outlets of individual banks first suite collective "pause orders."

"Securities Daily" quoted the news that the number of real estate agent, has been notified of two state-owned big firms, September 14 started the first suite of 5% of the lowest floating interest rate policy; at the same time, the implementation of individual banks adjusted to the lowest benchmark interest rates go up 20% of the interest rate policy; as well as the first suite of individual banks to suspend orders.

New Home Prices Rise 0.2pc in August

Although prices rose in 46 cities last month, the number of cities seeing price declines jumped to 18 as the average increased fell to 0.2 percent. Existing home prices increased 0.3 percent, with 54 cities seeing rising prices.

Recent months still saw large single month prices increases, but that wasn't the case in August. Guilin and Harbin saw the largest increase in new and existing home prices respectively, both rising 1.1 percent.


Everything is Destroyed, Even the Dreams: Huobi, OKCoin Executives Told to Stay in Beijing

iFeng: 火币网、OKCoin负责人、高管被要求不得离京
A number of informed sources, the current Bitcoin trading platform each person in charge, and so not to leave Beijing executives to cooperate with the investigation. In accordance with regulatory requirements, the trading platform for shareholders, actual controllers, executives, such as chief financial officer during the cleanup exit to fully cooperate with relevant work in Beijing.

The industry believes that, with the two virtual currency trading platform shut down all operations, is expected to Bitcoin prices will fall. However, now with the basic out to do bad, investor sentiment being stable, Bitcoin stabilize prices for the time being. As of press time yesterday, reporters, Bitcoin prices declined slightly, quoted near 19,000 yuan.


Why Did Real Estate Stocks Skyrocket in the Past 6 Months?

An article in iFeng asks why real estate stocks skyrocketed: 地产股为何半年内普遍疯涨三到五倍?答案令人震惊
So the question is: In the past six months is the period of the country continue to tighten regulation of the property market, the property market is gradually cooling. Now, the regulation has been extended to the northeast and western regions, in which case, why real estate stocks also so cattle?

A few examples from the article:
Two days ago, our team of "Financial Powerhouse (ID: tttmoney8)" by National Bureau of Statistics has just released analysis of the current dangerous situation facing the housing market. In a nutshell - due to the inventory moving very quickly, the current average digestion cycle of new housing is only three months or so; overall, the average real estate digestion period (including office buildings, commercial property) is only over five months a. But the "office" and "commercial space business" is still very long period of digestion, were 10.6 months and 18.4 months.

In other words, residential developers to continue re-stocking phase (of course, there is still excess partial).

But this is far from the real estate reason leading shares rose.

The core reason is the rapid rise in land prices, so that value of the large land banks rose significantly.

...A large international investment bank for this housing prices made an estimate, this time scored above the land of housing prices is to spend 458 billion yuan, but now the value has risen to 9,000 billion yuan. In other words, this intrinsic value of housing prices rose by 450 billion yuan, but its total current market value of only 300 billion yuan (RMB) or so.

Do not think the developers have significant "cover" behavior, in my observation, this is a fast development, rapid sales characterized by housing prices, the products are mostly for just need to improve the type of demand, rarely engage in particularly high real estate. However, the past couple of years land prices rising too fast, so reserve value of the land it has quickly doubled!

And that is an important reason for the stock price soaring ward rate.


TSF Credit Growth Up 21.5pc YoY

Too soon to say if growth peaked in July at 24.3 percent, but it may have given the crackdown on shadow lending. If both TSF and M2 decelerate together, credit growth contraction in China will finally begin in earnest.

China's Reserve Coverage of M2 Slips to 12.4pc

The yuan is rising, but there's no fundamental pressure pushing the yuan up. It is solely dollar weakness. Chinese FX reserves are down to 12.4 percent of M2. This number does not matter to the markets and it may never matter if the fundamentals reverse, but we're getting within striking distance of 10 percent.

The Chinese government cracked down on overseas acquisitions, requires paperwork for foreign currency transactions over $147 and told multinationals not to take their money home for a reason, and it isn't because the yuan is fundamentally strong. The yuan was more useful three years ago.

M2 Slows to New Low in August

M2 growth slowed to 8.9 percent over the past 12 months, but 3-month annualized growth ticked up to 11.3 percent. The latter number is 2.8 percentage points below the August 2016 pace.

M2 historically slows sharply in September and October.


What A Steel: Chinese Production at New High in August

China Daily: China, US recognize that steel overcapacity requires global solution
Meanwhile, the Chinese delegation told the US side that China had actively taken measures to cut steel overcapacity, Zhu said, citing China's plans to reduce steel capacity by 100 million to 150 million metric tons from 2016 to 2020.

Bloomberg: China’s Steel Mills Run at Full Tilt as Output Hits New Peak
Crude steel output climbed to 74.59 million metric tons last month, surpassing the previous peak of 74.02 million in July, and up from 68.57 million in August 2016, according to the statistics bureau Thursday. While that’s an all-time high for the month, daily output was less than the record in June. Production surged 5.6 percent to 566.4 million tons in the first eight months, also a record.
Extrapolate the August 2017 increase from August 2016, and you get 72 million tons of increased production. Year to date, production is up 30 million tons.

By the time China cuts 100 million tons of production, it will be back to late 2016 levels.

Tariffs are coming.

Real Estate Investment Steady in August

Real estate investment growth rose 7.9 percent YTD, 7.8 percent in August.

NBS: 2017年1-8月份全国房地产开发投资和销售情况

Fixed Asset Investment Tumbles in August, Primary Industry Investment Collapses

Fixed asset investment rose 7.8 percent YTD and 3.8 percent in August.
Private FAI increased 6.4 percent YTD and 3.0 percent in August.

Private investment in primary industries has been double digits for months on end, but fell to 1.5 percent in August. Although it is only 4 percent of total private investment, it is the beginning of the economic cycle. It may be China is finally cracking down on overproduction.

NBS: 2017年1-8月份民间固定资产投资增长6.4%
NBS: 2017年1-8月份全国固定资产投资(不含农户)增长7.8%


Apartment REITs Coming to China

iFeng: 住房租赁REITs酝酿启动 证监会相关政策在制定中
In essence, REITs (Real Estate Investment Trust) is a way of asset securitization. Some real estate companies have tried to launch "category REITs" products. However, these "category REITs" products mainly for institutional investors, the real public offering REITs products have not yet launched.

China Real Estate Development Group Chairman Meng Xiaosu previously disclosed in public, recently the China Securities Regulatory Commission to China Securities Industry Foundation of the Association of the name of the organization organized a special committee to promote real estate securitization. The reporter also learned that the current domestic long-term rental apartment management enterprises in the active contact with the SFC issued housing leasing asset securitization projects, especially the REITs project.

...Driven by the relevant policies, the industry is expected, housing rental market space will be very broad. Studies have predicted that in 2020 the size of the domestic housing rental market up to 1.6 trillion yuan, 2030 can reach 4 trillion yuan. First-tier cities in the net population inflow, especially in the north of the three major cities of the housing rental market to an average annual rate of 15% growth.
For those interested, there's also a poll on fertility and real estate under the article, asking readers if they plan on having 2 children, reasons for and against, if they would move with two children, how large an apartment they would want with two children. Note the link goes to iFeng Wuhan. There are probably multiple surveys for different cities.

Global Times: Time is right for China to embrace REIT benefits
The Chinese government has recently called for ramped-up development of the home rental market in bigger cities. A total of 12 cities including Guangzhou, Zhengzhou and Hangzhou have been designated for a trial program that aims to give renters the same rights as homeowners so as to jumpstart China's rental market. This could provide impetus to set up the country's REIT market as well, as it will encourage the professional leasing business, which can ensure yields from securitized property assets. It's noteworthy that the shift from reaping rapid gains by buying land for development toward earning long-term rewards through leasing businesses will fuel demand for REITs over time and ultimately result in a breakthrough in the country's efforts to set up its REIT market.

Progress with REITs could begin with a pilot program on a city-by-city basis, as it will be easier to manage. And various participants such as banks and lawyers can consider a workable framework for a nationwide launch.

Unrestricted Warfare Author New Book: China One of Three Powers

Wang Xiangsui wrote Unrestricted Warfare at the turn of the century. The book is essentially the case for asymmetric warfare.

Now Wang has a new book out.
Beijing Youth Daily: 《三居其一》建言中国复兴战略
In the "Sanju one: the world's future positioning of China," a book, WANG Xiang Sui boldly made a "world order reconstruction, third world" prophecy. On the one hand the United States may abandon its single-handedly created the global system, and focus on the United States itself, back to become "America America"; Europe will endeavor to prevent re-fragmentation of the European trend off, continue to follow the path of the European Communities; and with the China "along the way" initiative to promote win-win cooperation in the Pan-Asian community has been created. "Once we dominate the world of modern capitalist system a serious rift third of the world is becoming a new trend of history."

Accordingly, the book creatively put forward the position of China should "Sanju one", that "there is one-third of the world, various models have one." China does not attempt to dominate the world rule, does not seek global hegemony, neither do not want to undertake the United States as another empire. China asked for "a" spatially limited area, in the model is to provide an alternative development path and way of life. "Sanju First" is the Chinese path and model will become a model for the modernization of the road with the West on behalf of the United States, Europe coexist, which is conducive to developing countries to get rid of dependent development patterns and marginalized in the development and way of life on just one of many modes.
A half-hour discussion with Wang about his new book is here: 王湘穗:未来世界三分 中国必居其一

No Easing of RE Restrictions, May Even Intensify as Beijing Investigates Consumer Loans

Beijing investigators are looking into consumer loan proceeds misappropriated for real estate investment.

iFeng: 楼市调控无松动迹象:反弹激烈地区不排除进一步升级
In early September, Beijing Banking Regulatory Bureau, the People's Bank Business Management Department jointly issued a circular calling for banking financial institutions to carry out checking work for personal business loans and consumer loans, focus on examination of the "room repay loans" and other illegal funds flowing into the real estate market Happening. Beijing Municipal Construction Committee issued a document at the same time, requiring brokers to carry out self-examination irregularities, including the content of "more than a single loan amount of $ 200,000 loans for personal consumption." Subsequently, Shenzhen, Jiangsu, also came news thorough investigation of consumer loans into the real estate market, and ultimately confirmed.

Beijing, Shenzhen and Jiangsu Province, Nanjing, Suzhou, Wuxi and other cities, market regulation are "hot cities": tighter regulation after this year's market trading volume also showed a visible decline. At this point, consumer loans remained "contrarian" to enter the property market, the logic behind the concern. Consumer credit flows thorough investigation of the significance of the signal, the same can not be ignored.

Wind data show that from January to July 2017, residents of the new short-term consumer loans reached 1.06 trillion, up by 713.7 billion and 830.5 billion has been far more than the level of last year. But some consumer loans how many entered the real estate, is hard to estimate.


Signs of a Credit Bubble: A-Shares Firms Loading Up on WMPs

iFeng: A股公司理财规模近万亿 五年暴增近300倍
986.3 billion yuan, which is this year, A-share listed companies to buy financial products in the total amount equivalent to half of the balance of Yu E Bao.

China Securities Journal (ID: xhszzb) Choice reporter access to data discovery, this year a total of 974 A-share companies to buy financial products, accounting for more than 29%. Purchases equivalent to 127.5% of last year. 413 companies to disclose financial products yield to maturity in the statistics, 38 companies financial products yield to maturity is higher than the semi-annual reported net profit.

...From 2.75 to 773.3 billion in five years

Choice according to statistics, as of September 10, this year has 974 A-share companies involved in the purchase of financial products, the cumulative size of 986.3 billion yuan; while last year a total of 774 listed companies involved in the purchase of financial products, the cumulative number of financial management to 10076 times, total purchases of about 773.3 billion yuan. In other words, this year more than 29% of A-share companies to buy financial products, and purchases are equivalent to 127.5% of last year.
The chart below shows year, number of firms buying WMPs, number of purchases of WMPs, and total value. The bottom row is the cumulative total over the past 5 years.
These are the top ten firms buying WMPs this year. I've made a paper portfolio of them, 10 percent equal shares.
China Shenhua Energy Company Limited 601088
Xinhu Zhongbao Co Ltd 600208
Guangdong Wens Foodstuff Group Co Ltd 300498
China Shipbuilding Indusr Grp Pwr Co Ltd 600482
Minmetals Capital Co Ltd 600390
JiangSu Bicon Pharmaceutical Listed Co 002411
Changsheng Bio-technology Co Ltd 002680
Sany Heavy Industry Co., LTD 600031
Oriental Pearl Media Co Ltd 600637

Seven companies are profitable thanks to WMP earnings, while 31 others earned more from WMPs than from their operations:
Choice statistics show that 413 companies to disclose the yield to maturity of statistics in the first half of 2017, a total of 38 financial products yield to maturity is higher than the company's net profit, which ST Minco, Yin Fung Holdings, * ST good power , etc. 7 companies rely on income investment products obtained resulting in net profit is positive. For example, ST Minco show net profit of 14.8103 million yuan in the first half, while its financial income of up to 31.1575 million yuan, equivalent to 2 times more than the net profit.

...An investment banker, told reporters, bank financing yields continued to rise this year to some extent stimulate the investment enthusiasm of listed companies, in many cases, banks are disguising WMPs sales as loans.

"Banks currently weak growth in deposits, banks Lanchu fierce competition, at the introduction of high-yield financial products to attract customers, the cost of liability-side end uplift lead to asset yields continued upward. This will lead to the end of financial products on the one hand debt yields continues to rise, on the other hand assets end interest rates have been increased public borrowing, "the investment bank explained," for the banks, listed companies are relatively high-quality customer base, in order to retain customers, banks issued to listed companies when liquidity loans tend to match sales of financial products, in order to yield financial products to cover the cost of increased interest rates rise. "

"Operationally, such as the essence of the company only needs two hundred million funds, which banks on the basis of the amount of the extra point, but requires listed companies to go beyond this part of the borrowed funds used to purchase financial products for banks, able to retain customers, completion of lending and financial management tasks, while companies can take to cover the rising cost of borrowing, both sides are willing to accept such an operation. So you can see, the listed companies to buy financial products, banks are often its counterpart of bank credit. "the investment bank It pointed out.

Time to Short the Yuan?

The decline of the dollar through my redline has led me to lighten my positioning in the dollar. I still think a bottoming process may be underway though, so I am not yet flipping to a dollar bearish position.

The yuan is a more interesting case since the PBoC announced it would remove reserve requirements on future contracts. The PBoC upped reserve requirements to 20 percent in order to slow yuan depreciation.

Back in August 2015: China c.bank to clamp down on forwards trading to curb yuan depreciation
China’s central bank plans to tighten rules on trading of currency forwards from October, sources with direct knowledge of the matter told Reuters, in a move to curb speculation and volatility after a shock devaluation of the currency last month.
In the past year, the yuan has followed other currencies in moving higher against the U.S. dollar. There has been yuan depreciation against the euro.
Going back to before the yuan's surprise devaluation in August 2015 shows the yuan remains weaker than euro, the Dollar Index basket, and a basket of emerging market currencies.
China's credit bubble expanded over this period and reserves deteriorated into the end of 2016.

China bulls are optimistic about the bump in global growth, rising copper/commodity prices and/or see China as having the ability to defy Nature without consequence.

Instead, I see China reaching the limits of credit growth.

Important to my thinking, I see the commodities rally as nearing an end along with a reversal in the U.S. dollar still likely. Euro strength is starting to be a concern in Europe. FT: Mario Draghi faces easing dilemma as strong euro sparks concern

Canada hiked interest rates this week as the housing bubble starts to unwind. U.S. home prices peaked in 2006 and it took 12 to 18 months for the financial markets to figure it out. Financial Post: Toronto home prices fall into bear market as sales plunge almost 35%

Speculators are betting against a December rate hike. The market could turn even more bearish on the prospect for rate hikes, but that would require a deterioration in global economic growth, which would be dollar bullish. The market has to stay in a sweet spot where commodities are rising and the Fed holds off on rate hikes to keep the current dollar weakness going.

Copper is tied to China. Mining.com: Copper price rally comes to crashing halt after Chinese data disappoint. I am always open to the market proving me wrong, but I will be shocked if the spike in aluminum and steel production in China signals a new surge back to 10 percent GDP growth, rather than the last gasp of zombie production. Reuters: China's steel, aluminum output at record as U.S. mulls penalties

The latter story leads into my next thought, which I have held as part of my bearish yuan/China correction thesis, that China would run out of political room at the worst moment. On the one hand, China is flexing its muscles with North Korea, expanding into the South China Sea, had the yuan added to the SDR basket, has A-Shares added to the MSCI Emerging Market Index. On the other hand, President Trump wants tariffs on China. On steel exports, he doesn't need anything except Chinese production and export data. He can also use tensions with North Korea or an incident in the South China Sea. There are several ways for President Trump to quickly turn public support against China. Given social mood and economic conditions, it will likely prove to be wildly popular. Economics, security, nationalism and patriotism all coming together.

China is highly leveraged to itself. It created most of the world's credit over the past several years. The credit is mostly backed by Chinese real estate and hard assets, investments in commodities (or if you're uber-bearish, nothing at all). The Chinese government cracked down on the flight of capital overseas, it is now cracking down on alternative exits such as Bitcoin. According to statements from Chinese cryptocurrency exchanges, it sounds as if China will ban transactions involving CNY. Assuming that is the new policy, it appears to be aimed at capital flight.

SCMP from June 2: Chinese banks told to report overseas cash withdrawals plus transactions over US$147

Bitcoin exploded from $1900 from July 17 to a high of $5000 on some exchanges on September 2.
The yuan has risen sharply in the past month, staring on August 24. North Korea launched missiles on August 26. On August 28, there were reports that Trump wants tariffs on China. The same day U.S. time (morning in Asia), the DPRK fired an intermediate-range missile over Japan. The recent rapid rise in the yuan looks either like the yuan playing catch-up to the euro and other EM currencies or aimed at mollifying President Trump. It looks political, not economic.

I like the probabilities of being bearish here.

China's Major Religions Plan to Sinicize

Global Times: 5 main religions in China agree to sinicize
Leaders from five religious communities - Buddhism, Taoism, Islam, Catholicism and Christianity - reached a consensus at a forum that "the direction of religions is to integrate them with Chinese culture."

The forum themed "Chinese culture and religious sinicization" was held in Beijing on Wednesday, the Xinhua News Agency reported.

Although Christianity has already been sinicized in terms of sovereignty, the sinicization in theology and cultural denotation is yet to be achieved, Fu Xianwei, chairman of the China Three-Self Patriotic Movement of the Protestant Churches, said at the forum.

Chinese believers in Christianity can understand it in the context of Chinese culture, language and thought, Fu said.

According to Shen Guiping, a religious expert at the Central Institute of Socialism, sinicization means sinicizing Christianity in every aspect, including doctrines, cultural customs, morality and culture.

But, Shen told the Global Times that "Christianity currently follows the rule of indigenization but it doesn't necessarily implement sinicization. The ideas of 'evangelism, the Great Commission and cultural mandate' are used with the aim to reshape China, Chinese culture and ideologies."

Catholicism in China is preparing the five-year plan of the religion's sinicization to guide local churches, said Ma Yinglin, chairman of the Bishops' Conference of the Catholic Church in China, the China News Service reported.

Catholicism in China has been seeking to sinicize the religion in terms of priesthood, system, protocol and oratorio since the founding of China, Ma said.


Social Mood: Horror Flick "IT" On Pace for 100M Weekend

The Hollywood Reporter: Weekend Box Office: 'It' Scares Up Record $51M Friday for $100M-Plus Bow
The film adaptation of Stephen King's creepy novel is already shattering numerous records, including landing the biggest opening ever for a horror movie, or for the month of September.

There is nothing clownish about It, which grossed a massive $51 million on Friday from 4,103 theaters for a weekend debut north of $100 million.


Front Page of iFeng.com: Explaining Bitcoin and ICOs

This is more mainstream coverage than I've seen in the U.S., although the U.S. media market is admittedly more fractured.

iFeng: 财知道338期:关于比特币和ICO的一些基本概念

The article closes with:
Former US presidential candidate Ron Paul said "do not steal, the government hates competition", savoring, meaning profound.


Cent Committee Investigating Real Estate in Hot Cities, Developers Nervous

iFeng: 中央部委正督查热点城市楼市 开发商紧张低调求安全
September 5, Hubei Province, the SASAC issued "on prudent investment in real estate," which clearly requires provincial funding organizations and their respective sub-enterprises in the construction, real estate sale to speed up the progress of construction, sales progress, to ensure that funds withdrawn from circulation as soon as possible, reduce leverage. Insiders said the SASAC intervene real estate is very rare, which means that real estate regulation may continue to overweight.

..."Notification" is very Jian Jie, only two specific requirements: First, starting from September 5, the province invested enterprises and their subsidiary enterprises at all levels of the new real estate investment principle cautious, and strictly control risks; Second, the province invested enterprises and their All levels of sub-enterprises in the construction, real estate sale to speed up the progress of construction, sales progress, to ensure that funds withdrawn from circulation as soon as possible, to reduce leverage.

Insiders said that the notification came second market regulation signal is very Qiang Lie, state-owned enterprises no longer explicitly require new investment and real estate, but also to build a house to sell the house as soon as possible, accelerate capital returns, this also means that housing prices high leverage and get to buy a house people plus leveraged investment behavior is not allowed.

...Reporters also learned that the relevant central ministries Inspectorate are hot urban property market a new round of inspections focused on checking Housing prices common hoarding, cover plate and other acts to promote housing prices according to the contract started, completed, form effective supply of housing as soon as possible, ease the market supply and demand.

Developers currently selling in the market are very nervous, low-key, security, will not be concerned about the demands of mainstream developers.


Socionomics Alert: The New Age of Magic

PJ Media: The Coming Age of Magic
The classic characteristic of magic is wish fulfillment. Sigmund Freud argued that "the motives which impel one to exercise magic are easily recognized; they are the wishes of men ... At bottom everything which he accomplished by magic means must have been done solely because he wanted it." Psychologically it is a most unscientific world. Desires replace the laws of physics.

Ironically that primitive attitude accurately describes the contemporary public attitude toward technology better than rationality. The idea that people ought to know better than to apply ointment sounds bigoted. Things should simply just work. The politically correct solution is to create sunscreen that YOU CAN apply to your eyeballs so you can watch the solar eclipse in safety. The morning after pill, the eat all you want but never get fat diet, the bottomless credit card, "affordable healthcare" despite accepts all preexisting conditions are applications of this principle. The preferred solution to today's problems is no longer to intelligently avoid injury but to abolish its consequences.

This idea we should be protected from our own choices may have taken deeper root than commonly realized. The right of everyone to be stupid AND avoid the consequences has become mainstreamed as the equality of outcomes.

...While some of this magical thinking can be blamed on the usual Marxist dogma part of it may be due to the growing gulf between the frontier of understanding and popular culture. The Age of Enlightenment enabled the common man to access knowledge formerly reserved to a few. It allowed people to understand for the first time why things worked. However the recent technological revolution has created the opposite effect. Fewer know how anything works. This has widened the divide between the ordinary person and the principles that power his world.

It may get worse as technology become ever more subtle, built in many cases on quantum and other effects that cannot be grasped by "common sense". The relative percentage of people who actually know how things work may gradually diminish. If Artificial Intelligence ever takes the lead in scientific inquiry, as many predict, the market may see appliances that no one -- no human being at least -- even understands. It may be no coincidence that two of the most popular entertainment franchises of the early 21st century, J. K. Rowling's Harry Potter and George R. R. Martin's Game of Thrones attract audiences of millions.

The age of magic isn't dead. Perhaps it has only just begun.