All Bubbles Burst: China's Real Estate Market Crashing, Eurogroup Prepare For Grexit & Default...

INVESTMENT WATCH BLOG ^

[alexmark1917]

China's Real Estate Market Crashing...

Real Estate is the single biggest domestic lending segment in China. Combined with deflation in Iron Ore, Steel, Copper, and other industrial metals China's collateral quality is looking very very shaky compared to loan volume...

SNIP

While the world's attention is glued to events in Greece, the real action continues to evolve quietly thousands of kilometers east, in China, where the near record surge in new loans remains unable to offset the dramatic slowdown in shadow banking issuance. And while China's bubble-chasing, animal spirits have recently reoriented themselves from real estate to the stock market, it is the real estate that holds the bulk of China's wealth. The problem here is that as China reported overnight, new-home prices in the world's most populous country just recorded their biggest annual decline ever!

BREAKING: #China new home prices fell 5.1% in January. Oops. The next thing to drop will be the yuan. The #CurrencyWars roll on.

— Jim Rickards (@JamesGRickards) February 17, 2015

Global Recession lives on everywhere but Wall Street: BBC News - Chinese home prices fall for ninth month

China has created like 7 Trillion worth of debt over the last four years, massive unprecedented credit expansion, and you can bet a percentage of those loans will go bad, probably around 5 to 10% even in a good economy, that's 700 Billion in bad debt under normal circumstances, but now we've entered a deflationary cycle, and the value of collateral securing these debts has been cut in half in some cases, so even if you only add another 10% to the bad debt load (and it will be more like 25%) because of collateral devaluation, you're talking 1.4 to 2.1 Trillion in bad debt clogging the Chinese banking and shadow banking system.

So what was China's answer, kick the can down the road and make matters worse, they lowered the amount of Capital banks must hold in reserve for bad debts so they could loan that out and extend a number of those bad loans...

Do we see a problem here?!?!?

Eurogroup Meeting Ends; Talks Have Broken Down; Prepare For Grexit & Default...

Well that didn't last long. It seems - just as earlier in the week - the ability for either side in this Euro-system death match game of chicken to find any common ground to even start negotiations remains lost:

GREEK GOVT OFFICIAL SAYS THAT "IN THESE CIRCUMSTANCES, THERE CANNOT BE A DEAL TODAY" EUROGROUP DISCUSSED "UNREASONABLE", "UNACCEPTABLE" DRAFT TEXT INSISTING ON EXTENDING BAILOUT

Greece rejects 'blackmail' in eurozone debt deal row

Greece looks set to slide out of the eurozone

The Greeks Are Running Towards Gold As The Retail Demand Increases By 123%

Traders Lose Faith In BoJ After Another Weak Bond Auction Wrecks The Carry Trade...

Watch Japan...

Yet another weak Japanese bond auction (this time 5Y maturity - lowest bid-to-cover and biggest tail since 2013), on the heels of last night revelations of a growing chorus of JPY-devaluation-fears has many wondering if the faith they placed in The BoJ's grandest experiment was wrong after all...

Retail Sales Plunge Twice As Much As Expected Worst Back To Back Drop Since 2009...

So much for low gas prices stimulating the economy...

Following last month's narrative-crushing drop in retail sales, despite all that low interest rate low gas price stimulus, January was more of the same as hopeful expectations for a modest rebound were denied. Falling 0.8% (against a 0.9% drop in Dec), missing expectations of -0.4%, this is the worst back-to-back drop in retail sales since Oct 2009. Retail sales declined in 6 of the 13 categories...

Sometimes I feel like I'm living in an economic bubble. It's charts like this that seem to confirm that theory. pic.twitter.com/pknKXopX0A

— A.J. Watson (@ajwatson) February 12, 2015

7 charts that warn the stock market may be wrong: http://t.co/wGP2I3a7cu pic.twitter.com/D6cOQaUHaW

— MarketWatch (@MarketWatch) February 17, 2015

Thailand's GDP growth is falling further behind its neighbors http://t.co/zVEVsUXskv pic.twitter.com/oFbex9e0gG

— Bloomberg Business (@business) February 17, 2015

[Vigilanteman]

Empty shopping centers and housing developments cannot last indefinitely without buyers.

[longtermmemmory]

It is not the money of a Greece exit, it is the political cost. It impacts the “union” since far left parties return with a vengeance.

[WMarshal]

The Demonrats and the Fed bureaucrats at doing everything possible to delay the day of judgement until after the 2016 elections.

[Vendome]

China is a bunch of fake cheatz....

[familyop]

China, crashing every week in sponsored globalist propaganda since 2007. Don’t look at Greece defaulting now.

[SunkenCiv]

• The Chinese economic crumbling is the natural consequence of the Obama Recession; they'll have help devaluing the Yuan as the US$ has been rising, but the main threat is that US consumer spending hasn't been recovering.
• That has helped pushed down the demand for crude.
• Without a robust export market, Chinese demand for crude will drop (or continue to, I didn't check), which will mean the glut will get worse.
• That will result in a further slide in the value of the Euro, which will have an impact on the export market INTO the EU, apart from Russian hydrocarbons (Putin needs all the money he can get).
• OPEC won't uncouple the Euro as the defacto crude pricing currency, for some time at least.
• Greece will have to settle on EU terms, or be ejected, and Greece can scarcely afford to be ejected, even though I think their largest trading partner is Turkey, which is not in the EU (or likely to ever be).
• Greek-Cypriote-Israeli natural gas (and some oil) production could lead to a new independent supplier cartel to the European market, one not beholden to OPEC, Russia, or Turkey.
• The UK will vote to exit the EU.
• Iran's economy will not collapse for at least two years, thanks to Obama's sending them $700 million love letters every month until they agree to a nuke treaty, and they will never agree.
• Meanwhile, Egypt will invade Libya.
• Bibi will win in Israel.
• David Cameron will form another gov't after the UK's May election.