Astrology Makes a Comeback

The signs of a major turn in social mood keep piling up. Superstition, magic and witchcraft are signs of negative mood. The stock market is at all-time highs and the economy has grown slowly, but if you look at the cultural markers, it's negative on nearly all points. The next recession is going to unleash 20 years of pent up negative mood.

SCMP: How millennials and app culture turned astrology into a modern obsession
The apps are, regrettably, correct. Not only am I all of those things, I’m a Cancer sun, Sagittarius rising and an Aries moon. I found this out when I fulfilled a typical millennial trope: texting my mother to ask her what time of day I was born.

“It was early,” she replied. (Wrong. It was evening, we later determined.)

It was Co-Star that told me to text my mother, because the app needed the information to produce my natal chart, which uses the positions of planets and stars at the exact time of one’s birth. It produces horoscopes that some say are far more sophisticated than the generic “good luck in finance and love” you see in many newspapers and magazines.

CBIRC Revises Rules for Bank Failures

Caixin: China’s Regulator Revises Rules on Banks’ Capital Replenishment Tools
China’s banking regulator clarified criteria for innovative capital instruments for commercial banks, which are under increasing capital pressure following a national deleveraging campaign.

In a guideline issued Friday, the China Banking and Insurance Regulatory Commission (CBIRC) laid out the capital loss absorption sequence for different classes of capital instruments, addressing questions such as which get paid first between holders of perpetual bonds and preferred stock in case of a liquidation.

Under the CBIRC’s rules, perpetual bonds and preferred stock will be paid at the same time as they are both tier-1 capital replenishment tools. The commission ruled that when a trigger event occurs, all of the same class of capital instruments shall initiate a write-down or conversion at the same time in proportion to the total amount of capital instruments of that class, before the write-down or conversion of the next level of capital instruments.


Plug Pulled on Latin America

If this holds, the U.S. dollar is about to get a Latin American rocket booster.

CIRC Chief Discusses Shadow Banking

iFeng: 银保监会主席郭树清:继续拆解影子银行 遏制房地产泡沫化倾向
Guo Shuqing, Party Secretary of the People ’s Bank of China and Chairman of the Banking and Insurance Regulatory Commission, said at a symposium on “deepening financial reform and serving the development of the real economy” hosted by Nanchang Zhongzhi of the People ’s Bank of China. We have done a solid job in "six stability" and made concerted efforts to prevent and defuse financial risks and made substantial progress. The main manifestations are as follows:

The first is to accurately deal with illegal financial institutions and financial groups, and to rectify various violations in an orderly manner according to law; the second is to deal with the risks of shadow banking in an orderly manner and substantially reduce the size of cross-financial business; Activities, and continued to carry out special rectification of Internet financial risks; the fourth is to increase efforts to expose and dispose of non-performing loans in the process of supporting economic restructuring and effectively prevent traditional credit risks; the fifth is to strive to stabilize the overall economy and the leverage ratio of major sectors , Focus on reducing the level of debt ratio of state-owned enterprises; sixth, while resolutely curbing the increase, steadily resolve the risk of the local government's hidden debt stock; seventh, further suppress the financialization and bubble of real estate, stabilize housing prices, land prices and expectations; eight is positive Support small and medium-sized banks to deepen reforms to prevent risks and encourage multi-channel capital replenishment. Nine is to respond to external shocks securely and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.


Shenzhen Banks Stop Mortgage Lending

财新:多家银行深圳分行暂停发放按揭贷 利率不会随LPR下调
The real estate market has already played the "five limit spectrum."

  The so-called "five-limit spectrum" refers to the restriction of loans, purchase restrictions, sales restrictions, price limits, and business restrictions, which form a suppression of the real estate market from both sides of supply and demand. In terms of credit limit, the measures adopted by the supervision are mainly through window guidance and compliance inspection, and strictly control the scale of on- and off-balance sheet of real estate personal mortgage loans and development loans.

In this context, individual banks in individual regions have suspended the issuance of housing-related loans. In September 2019, individual stock exchanges in East China had suspended the issuance of real estate development loans (see Caixin.com, “ Banks tightened development loans, individual branches in East China have suspended lending ”).

  According to Caixin reporter, in mid-November 2019, the Shenzhen branch of the two major state-owned banks , China Construction Bank and Bank of China, has suspended the issuance of mortgage loans. A senior real estate market source told Caixin reporter, "From November 18, 2019, CCB Shenzhen Branch has suspended the lending, and the CCB head office directly closed the Shenzhen branch's (mortgage loan) lending system."

  A Shenzhen branch of a stock company also confirmed the above information, and said that because of the role of CCB in Shenzhen, the bank is also considering whether to follow up on lending. According to Caixin reporter, Ping An Bank Shenzhen Branch suspended the mortgage loan from October, and “the annual loan quota has been used up”.


Pork Prices Fall for Three Weeks

iFeng: 降降降降!降降降降!刚刚,“二师兄”八连降
Among them, imports from Spain, Germany, Canada, Brazil and the United States were 247,100 tons, 221,600 tons, 171,500 tons, 144,000 tons and 139,400 tons, accounting for 70% of the total imports, respectively, a significant increase year-on-year. 42.5%, 27.6%, 38.2%, 32.8% and 73.3%.

Since the beginning of this year, the list of permitted importing countries in China's pork market has continued to increase. On November 19th, the first batch of Italian frozen pork exported to China had successfully entered the domestic market. At present, there are 18 countries and regions that allow pork exports to China, including the United States, Canada, Argentina, Brazil, Mexico, Chile, France, Ireland, Italy, Denmark, Germany, Finland, the Netherlands, Spain, the United Kingdom, Austria, Portugal, Switzerland.

In addition to the increase in the supply of pork, from the beginning of October, the number of breeding sows in the country has stopped falling, and the decline in live pigs has narrowed significantly. According to the monitoring of the Ministry of Agriculture and Rural Affairs, the number of breeding sows in August decreased by 9.1%, the decline in September narrowed to 2.8%, and in October it increased by 0.6%.

China 2019 is China 2014

Same debate, only this time with more debt and greater risk. The PBoC lost all prior rounds.

Bloomberg: Inside the PBOC’s Struggle to Balance China’s Growth and Debt

Existing Home Prices Slowing in Beijing, Shenzhen Stronger

21st Century: 北京二手房降价调查:量价齐跌最长下滑周期来袭,限竞房“价格战”施压
"(Second-hand housing) prices are indeed declining. In the past few months, the price of the offer has been raised more than that. But even then, the transaction volume is not large." On November 19th, the business of Chain Home Real Estate Beijing Zhujiang Oasis Store Xiao Liu told the 21st Century Business Herald.

This store is located outside the East Fifth Ring Road in Beijing and belongs to the Shuangqiao area of ​​Chaoyang District. According to the data of the chain home app, at this stage, the average transaction price of second-hand houses in the region is about 45,000 yuan / square meter, which is slightly lower than the price level in the first half of the year. Since the second half of the year, the volume of transactions in the region has been at a low level.

In this round of real estate market adjustment, Beijing is one of the earliest regional markets that have introduced policies and are the first to be effective. At present, the volume of second-hand housing transactions in Beijing accounts for more than 80% of the overall market. The change in the second-hand housing market is almost a portrayal of the Beijing property market.

According to the National Bureau of Statistics, from July to October this year, the average transaction price of second-hand residential properties in Beijing fell for four consecutive months. This is the longest downturn in Beijing's second-hand housing prices since 2018. The information reported by the frontline brokers is that the owners continue to cut the offer, but the wait-and-see attitude of the buyers is still serious.

Since the "317 New Deal" in March 2017, Beijing has not introduced new heavyweight control measures for more than two years. So, what are the factors that "disturbed" the price of second-hand housing in Beijing?


Every Time a Bell Rings, A Chinese Bank Goes Bust

ZH: China Quietly Bails Out Another Bank With 620 Billion Yuan In Assets
Harbin Bank, which is one of the biggest banks in China’s northeast with 622 billion yuan in assets as of June 30, 2019, and trades on Hong Kong’s stock exchange, becomes the fifth bank - after Baoshang Bank , Bank of Jinzhou, Heng Feng Bank, and Henan Yichuan Rural Commercial Bank - to be bailed out by the state, and will be 48%-controlled by two government entities after six private shareholders shed their stakes, according to a bank statement issued late on Friday.

Total consideration for the shares involved came to almost 15 billion yuan, or around $2.1 billion, the bank said, though it described the transactions as transfers rather than stock sales, which is to be expected if the bank was being bailed out instead of actually selling a viable stake.

As has been the customary case, the bank didn’t provide any reason for the transactions in the statement, and Chinese bank regulators made no comment on the action.

And, as was the case with at least one previous bank "rescue", Harbin Bank was connected to a former oligarch who disappeared not that long ago amid allegations of massive fraud. Indeed, as the WSJ reports, the bank is among a handful of financial businesses in China linked to once-powerful tycoon named Xiao Jianhua who in early 2017 disappeared amid a wave of prosecutions of big private investors. Businesses owned by some of those people, including Wu Xiaohui’s Anbang Insurance Group Co., have also since become government-owned.
What separates bulls from bears is fraud and how far it reaches into the economy.

Harbin Bank is also politically connected. From three years ago SCMP: Harbin Bank leads US$1.5 billion syndicated loan to Russian state bank, offering lifeline amid EU sanctions

WSJ: Why China’s Smaller Banks Are Wobbling

As I laid out in Pivot Time: Another Bank Run, This Time in Troubled Liaoning, I laid out a very brief and simplistic explanation of China's past decade of growth. Commodities fueled by China-related infrastructure development peaked in 2011. China then relies heavily on real estate, which in some areas peaks in 2014. Then banking took over and some banks, like the Bank of Jinzhou bailed out earlier this year, grew assets rapidly by making interbank loans. To boil it down even more simply, at first credit was force fed into infrastructure, then it funneled into real estate (and briefly into A-share stocks from mid-2014 into mid-2015), and then finally into the banks themselves. Credit is losing its efficacy, the marginal return on debt is falling, and now it takes rapid credit growth merely to prevent a collapse. Which is why I'd get very concerned if total credit growth slipped below 10 percent.

In the near term, markets reacted positively to China signaling the concerns are warranted.

CNBC: China cuts short-term funding rate for first time since 2015

You can go broke betting against the market because you can run out of money before the market does. The market is a weighing machine in the long-term, not in the short-term. Traders play poker. Markets bounced today because they have a Pavlovian response to central bank actions and the history of Chinese success in this area. There were bounces after downturns in 2008, 2011, 2014 and now in 2018. However, unlike the previous times, there's no major stimulus effort yet. Moreover, even if they try, history suggests the outcome will be even lower commodity prices, a higher USDCNY, a larger pile of bad debt and higher risk that stability is lost.

In not entirely unrelated news, China Battles Wave of Online Criminal Activity
The case was revealed by the Ministry of Public Security (MPS) during a briefing last week to highlight criminal activity on the internet that’s become so pervasive it prompted the authorities to start a special campaign in January called “Internet Cleanup 2019.” Part of the offensive involves cracking down on entities that infringe on citizens’ privacy through the acquisition of personal information and data. As of the end of October, the police have investigated almost 46,000 cases of internet crimes and arrested nearly 66,000 suspects for offenses including computer hacking, internet fraud, online gambling and cybersex, the MPS said.

One key focus of the campaign is a practice known as predatory lending, where unscrupulous money lenders use various means to deceive or coerce borrowers to take out loans they don’t need or can’t afford and that carry unfair or abusive terms. To find customers and control lending risks, the online lenders leverage data that’s been collected illegally and pay for support services from companies that provide technology, data and payment solutions.


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.


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


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.


Mortgage Slavery Outweighs Wealth Effect for Chinese Homeowners

Analysts at Oriental Securities compare China's real estate market to the U.S. and see parallels. Although they find China hasn't yet reached the levels of financialization seen ahead of 2008, many households are already constrained by their mortgages such that they do not experience a wealth effect from rising prices.

iFeng: 被金融裹挟的房地产:房奴效应大于财富效应
From the dynamic path of leverage in China's physical sector, the resident sector has been increasing leverage since 2008. In 2008, the debt leverage ratio of the resident sector was 18.77%, and it rose to 55.30% in the second quarter of 2019, an average annual increase of 3.3 percentage points.

The most important reason for the rise in housing prices is the rise in housing prices. People only talk about the wealth effect, but they ignore the “house slave effect”. The latter refers to the increase in housing prices and the increase in residents’ housing and rental expenses.

Empirical studies show that China is a house slave effect greater than a wealth effect. While rising house prices have increased the debt burden of the residential sector, they have also suppressed consumer demand and squeezed out investment in the physical sector, hindering productivity. It is the realization of the negative effects brought about by the excessive expansion of the real estate market. The "7·30" Politburo meeting not only re-emphasizes the positioning of "staying and not speculating", but also for the first time clarifying that "real estate is not a means of stimulating the economy in the short term." But from the latest data on real estate transactions and prices, market inertia is still significant.

From the analysis of this paper, we can see that from the perspective of realizing the policy objectives of real estate regulation, one way to refer to is to constrain the financial properties of real estate. The commercialization and financialization of China's real estate began in 1998. If China's real estate market is compared with the United States, China is still in the early stages of financialization. If real estate is left with financial development, then the story of the United States in 2008 is likely to repeat itself in China.


Chinese CPI Starts Soaring As Porkflation Hits and Comparables Bite

China's headline CPI spiked to 3.8 percent in October as pork prices jumped and unfavorable year-on-year comparisons started showing up. First the food, alcohol and tobacco category spiked 2.7 percent in October and up 11.4 percent year-on-year. Pork alone spiked 20.1 percent in October from September. Even though it has been talked about and prices rose over the past year, pork prices were actually relatively stable in late summer. This latest spike is a new round of increase and it took the year-on-year increase to 101.3 percent and 29.7 percent YTD. Overall meat prices are up 66.8 percent yoy and 20.5 percent YTD.

The next two month's comparisons are against negative 0.3 percent and 0.0 percent. If food inflation ran at similar levels for the next two months,the headline CPI could be pushing 6 percent by December.
As for the PPI, it was stable with a 0.1 percent increase from September. The headline number cratered to negative 1.6 percent because of higher inflation (crude oil) from this time in 2018 dropped out of the calculation.


Pivot Time: Another Bank Run, This Time in Troubled Liaoning

Another bank run, this time in Liaoning. The authorities have arrested people on charges of spreading rumors. After seeing China bottle up its troubles, it's unclear whether China's banking system is finally cracking or whether these are isolated incidents. Chinese culture has more herding than Western culture. A bank run is like a Black Friday sale in the USA, in that the crowd itself attracts more people. However, they are connected by one sure thing: social mood. Rumors of bank runs can happen anytime, but they only become serious when people have a reason to think they might not get their money back.

Sina: 辽宁营口沿海银行遭“挤兑” 回应:现金充足
On the afternoon of the 6th, the official microblog of the Public Security Bureau of Yingkou Economic and Technological Development Zone, the Public Security Bureau of Yingkou Development Zone, issued a notice saying that today’s online rumors of false rumors about the financial crisis in Yingkou’s coastal banks have led to a large number of The depositors went to the bank to cash in, and the staff gathered, causing the normal business order of the bank outlets to be disordered, and the surrounding security environment was unstable. After receiving the police, the Public Security Bureau of Yingkou Development Zone dispatched the police force to the six Yingyingkou coastal banking outlets in the district for security order maintenance, and brought a leading troublemaker suspected of disturbing public order to the Public Security Bureau for investigation. deal with.

  On the evening of November 6, the staff of Yingkou Coastal Bank Gaizhou Branch said to the news that at present all the outlets of the bank are in normal business operations, and there are still a large number of customers coming to withdraw funds, but the bank's cash is sufficient, "the special period is overtime. Avoid causing panic, let everyone know that they are doing business normally.
Yingkou is a city covered here before. About 18 months ago, the AA-rated port defaulted on its debt.

IICS: Update: AA+ Rated Yingkou Port Defaulted on ¥530 Million, Has ¥78.1 Billion in Debt

Way back in 2014, Liaoning was the epicenter of the real estate bust.

IICS: In Yingkou, Liaoning Unfinished Buildings Stretch For 50 Square Kilometers; Real Estate Graveyard

Later that year, I posted Liaoning Sounds Warning on Chinese Economy

If China's problems a systemic, it isn't surprising to see issues pop up in Liaoning.

FT: China’s small lenders suffer bank runs as economy slows
This week, police in Yingkou, a city of 2.5m people in the north-eastern province of Liaoning, arrested nine residents for posting “inappropriate remarks” on social media that Yingkou Yanhai Bank, a local lender, was in a “deep financial crisis”.

The online comments prompted local residents to flock to the bank’s branches to withdraw their savings. “Everyone says YYB is running into trouble,” said a Yingkou resident. “There must be an element of truth in it.”
Zhuang Bo, an economist at TS Lombard, a research firm, said YYB exemplified the difficulties faced by China’s small lenders that had expanded their footprint by issuing shadow banking products, which could include off-balance-sheet lending, peer-to-peer transactions and credit extended by asset managers.

Quick history lesson

Liaoning suffers from protracted industrial/commodity slowdown that starts in 2011
Liaoning goes all in on real estate development to boost growth
Liaoning real estate model implodes in 2014
Liaoning banks moved into shadow banking, WMPs to fuel growth
Liaoning banks hit a wall in 2018
Liaoning banks are going bust

Yes, Yingkou isn't the first Lianoning bank in trouble. The other was Bank of Jinzhou. It IPO'd in late 2015 as China's last round of stimulus was starting to have a positive impact. As I wrote then:
My curiosity got the better of me when I saw the bank is growing 50%+ yoy. I want to see how the bank increased assets to over 300 billion yuan with only 90 billion in loans. What are these assets? They're listed as debt securities classified as receivables. A look at the notes: wealth management products. The bank, as of June 30, had 90 billion lent out in normal banking and 125 billion lent out through shadow banking. Also from the notes: the average yield on their assets rose from 6.04% in the six months ended June 2014 to 7.80% in the six months ended June 2015.
And then in spring of 2019: PBoC Steps in to Support Bank of Jinzhou

Back in July I wrote China Credit Growth and Risk of Financial Crisis. Nothing has materially changed. Right here, right now, it looks like an important pivot point for the global economy and global financial system. If things progress in the direction of the past 8 weeks or so, then maybe the bank issues is overblown for now. "Trade talks" and the Fed's decision to grow the balance sheet will hit the pause button, at least until the Fed stops increasing its balance sheet in 1H 2020. If this is a pullback within a larger move, the denouement of central bank efforts since 2009, markets will deteriorate quickly given the widespread expectation (myself included) of at least a year-end rally in equities.


Real Estate Rage Returns

WSJ: China’s Housing Market Is Finally Cooling. Some Homeowners Are Furious

青岛新闻网:济南楼市:房价降了 每平米1万元出头的房明显多了 (Jinan property market: the price dropped, 10,000 yuan per square meter seen)

Aside from falling prices, what's notable about Jinan is existing-home listings are at an all-time high and rising as prices drop:
According to the transaction data of the chain home, the number of listed houses in Jinan reached 43,313 sets. In recent months, the number of new homes in the chain has been on the rise. In May, the growth of listings reached a peak of 6,617.

Although the number of second-hand houses listed is high, the house prices are falling silently. According to the data of the chain home, the average price of second-hand houses in Jinan in September was 18,411 yuan, and the average price was 16386 yuan/square meter. In October 2018, the price of second-hand houses in Jinan was 20,915 yuan / square meter.

"Some second-hand houses are obviously cut in price, but in fact, the price that was previously hanged is also high, and there is no market for price." Chu Xin told the Economic Herald reporter that many of the second-hand houses that are now sold are constantly adjusting prices. Only when there is a deal, there is basically room for bargaining.

iFeng: “银十”以量换价 房企降价冲刺将成普遍趋势
From the sales model, most of the housing companies increased their supply in October. At the same time as the pace of the push-up increased, the trend of price reduction promotion was obvious. Industry insiders expect that under the pressure of annual performance targets, the final two-month price sprint of real estate enterprises will become a general trend.

...In this regard, Zhongda Real Estate Principal Analyst Zhang Dawei said that compared with the data for the same period in 2018, the sales of housing enterprises continued to differentiate in the first 10 months of 2019. In the same period of 2018, the sales amount of real estate enterprises increased by more than 50% year-on-year, while in 2019, the sales of most enterprises were relatively stable, and the growth rate of some enterprises slowed down noticeably.
The average selling price has been lowered

From the average selling price, the average selling price of some real estate enterprises in October was lower than that in September. Taking China Evergrande as an example, the company's October sales brief showed that in October 2019, the company's contracted sales average price was 9336 yuan / square meter, and the average contracted sales price in September was about 10054 yuan / square meter.

The industry generally believes that from the sales performance, many housing companies have harvested "Golden September and Silver 10", but most of the housing enterprises have increased the supply, and some companies have significantly adjusted the price promotion. In order to scale up, the possibility of looting will not be ruled out in the last two months of the housing business.

A medium-sized housing enterprise executive told the China Securities Journal that in the current environment where the profit margin of the industry is squeezed, the profitability of future housing enterprises will depend more on the company's own refined operations and product strength.

It is worth noting that since October, some third- and fourth-tier cities have seen an increase in the property market and the average price has increased. 58 City and Anjuke data show that in October 2019, the national key monitoring 67 city online new home average price of 16,491 yuan / square meter, up 0.47%, the second-hand housing listing price of 15,432 yuan / square meter, up 0.08%. The price of first-tier cities is at a high level, the fluctuations are small, the prices are stable, the second-tier cities are basically flat, and the heat of the third- and fourth-tier markets is slightly higher, and the chain trend has changed from a decline in September to a rise of 3.7%.

In response to the trend of the property market in the later period, many industry insiders pointed out that the follow-up market is expected to continue to be stable. From a national perspective, in October 2019, the overall sales data of real estate enterprises is not low, but it is expected that the sales pressure of real estate enterprises in the next two months will remain very large. From the policy expectation, policy tightening expectations are apparent, and policies such as credit will curb the market, and the follow-up market may continue to decline.

Land market volume fell

The Kerry research report pointed out that in October, new homes, second-hand houses and land markets continued their downward trend in September, and they all continued to turn cold. The volume of new houses in key cities was down year-on-year and the chain was down. The transactions in Hangzhou, Ningbo and Xuzhou were significantly reduced. The volume of second-hand housing transactions fluctuated within a narrow range, and the chain also fell slightly. The volume and volume of the land market fell, but the land auctions in key cities have improved significantly, and the number of shots has decreased significantly from last month.

Ke Errui pointed out that the transaction volume of the land market fell again in October. However, under the support of the increase in the supply of high-quality land in Beijing and Wuhan, the transaction heat did not continue to fall, and the average premium rate was roughly the same as last month. Although the urban land market of all energy levels shows the same volume and price, the market heat is completely different. Among them, the transaction premium rate of first- and second-tier cities has rebounded from the previous month, while the third- and fourth-tier cities have continued to fall due to the market's continued coldness. The premium rate has also declined for many consecutive months, and this month has fallen to a low level below 10%.
Sohu: 原创楼市开始“煮温水”,两大明确信号已出现,李嘉诚、潘石屹不谋而合?
From the perspective of regulatory attitudes, it is highly probable that housing and housing will not become a social consensus, and the regulation of the property market will continue to deepen. According to statistics, in 2018, the regulation was issued 450 times throughout the year. By 2019, only 415 times were released in the first nine months, with an average of 1.5 times a day. The intensity has once again set a new record, and the number of times over 2018 is obviously a high probability event. It is worth noting that this year, the central bank lowered the release of 900 billion yuan, the loan interest rate also entered the LPR era, and the environment for reducing financing costs gradually formed, but the mortgage interest rate did not fall, but the housing finance continued to tighten. This means that the use of financial leverage to spur the land price and housing prices has greatly reduced, the country will obviously not rely on real estate to stimulate the economy, the property market regulation will continue to deepen.

...In fact, in the face of the changes that have occurred in the property market and possible changes, many real estate giants have smelled the taste early and have already acted. Take Li Ka-shing, who is most familiar with everyone, from the large-scale layout to the choice to leave, as early as 2013, the process of selling real estate began. This year, the project of Dalian, which has been held for 8 years, was sold again for 4 billion yuan. . In this regard, in an interview, he said that he would not risk to make the last copper plate. There is no such thing. News about the real estate giant Pan Shiyi’s “selling a house” is also constantly appearing. According to several authoritative media reports, SOHO China is selling core assets. The total value of these 8 projects in Beijing and Shanghai is between 50 billion and 60 billion yuan. In this regard, the industry believes that following Li Ka-shing, SOHO China's core assets in China will be almost empty. Then, in the face of Li Ka-shing and Pan Shiyi’s “selling house” behavior, how should buyers choose?

Yu Yongding Calls for Stimulus

Caixin: Yu Yongding: China Needs Stimulus
This approach is misguided. While structural adjustment is crucial, slower economic growth is not a prerequisite for success; on the contrary, it would impede reform. Moreover, given that the complexity of China’s labor market impedes data collection, it is likely that China’s employment situation is not as strong as many believe.

In this context, the Chinese government’s top priority should be to arrest the decline in GDP growth — not least to prevent a kind of snowball effect that will make restoring growth far more difficult later. After nearly a decade of continuous deceleration, with no end in sight, investors and consumers are becoming increasingly reluctant to spend. Serious financial vulnerabilities will only deepen their concerns; ceteris paribus, declining growth will worsen all indicators of financial stability.

...China has the policy space to implement a powerful economic stimulus package. While the side effects and limits of such a package should be fully recognized, the risks of a continued slowdown — not only for China, but also for a global economy primed for recession — dictate that the government should use it.

She's Out Back Counting Stars

11/6/2019: Maybe a shooting star...the whole sector of healthcare providers is worth getting acquainted with if only because it's likely the Democrat nominee in 2020 will cause at least one panic for the industry.

11/7/2019 Update: Looks like more room for a bullish thrust


China Will Deny Medical Care to Regime Critics Under Expanded Social Credit

China has been building its social credit system for years and already bans citizens with low scores from boarding planes and trains.

Guardian: China bans 23m from buying travel tickets as part of 'social credit' system
China has blocked millions of “discredited” travellers from buying plane or train tickets as part of the country’s controversial “social credit” system aimed at improving the behaviour of citizens.

According to the National Public Credit Information Centre, Chinese courts banned would-be travellers from buying flights 17.5 million times by the end of 2018. Citizens placed on black lists for social credit offences were prevented from buying train tickets 5.5 million times. The report released last week said: “Once discredited, limited everywhere”.
Now it will expand the ban to medical care.

Just kidding. It's the United Kindgom's National Health Service.

Breitbart: National Health Service to Deny Treatment for ‘Racist or Sexist Language, Gestures, Behaviour’
A National Health Service (NHS) trust has announced that it will withdraw treatment from patients it deems to be racist or sexist.
The North Bristol NHS Trust announced that patients will be subject a “sports-style disciplinary yellow card and then final red card in which treatment would be withdrawn as soon as is safe” on its official website.

The policy would cover not just “Threatening and offensive language” but also “Racist or sexist language, gestures or behaviour” more generally, as well as “malicious allegations” — a rather troubling caveat, given the NHS has in the past been entangled in large-scale malpractice scandals which hospitals and staff have initially denied.


Lou Jiwei Sees Ponzi Finance in Private Equity

Sina: 楼继伟:投资领域应采取盯市制度,防范“庞氏骗局”出现
First, there is a large number of Ponzi financing and Ponzi investment phenomena in the primary market. In the mature private equity market, a general partner (GP) manages only one fund in phases according to its own strengths and strengths in the same industry (information technology, biomedicine, etc.) or at the same stage (angel, venture capital or merger). The territory is highlighted by the fact that a GP manages multiple private equity funds of the same type. It is likely to reverse the project among various funds, manipulate the performance, and undertake the poor quality projects of the old funds through continuous new funds. Ponzi financing is supported by Ponzi's investment. For various reasons, the relationship between the general partner (GP) and the limited partner (LP) is abnormal and lacks trust. For example, LP requires a large proportion of fund shares, and has the veto power of investment projects, or turn GP into a project source team that seeks investment opportunities. The board of directors checks all levels and does not invest in similar private equity funds. The funds invested are head funds in the market. However, through extensive contacts with market institutions, it has been found that many institutions in the market have a tendency to have the above problems. The Council uses its unique market position and always emphasizes the constant standardization of the professionalism and focus of the GP team. Taking into account the particularity of the domestic market environment and stage, the Board appropriately relaxes the relevant requirements compared with the mature market, allowing GP to manage different styles and industries while fully segregating and sharing only the legal, IT and financial backgrounds. And a single fund at the stage, but with strict restrictions on the cross-cutting of each type of fund.