Skip to comments.Tech Sell Off, Bubble Comparisons, China | ITK with Cathie Wood
Posted on 01/12/2022 9:57:10 AM PST by SunkenCiv
On episode XXIV of "In the Know," (January 7, 2022) ARK CEO/CIO, Cathie Wood, weighs in on the tech sell off, innovation stocks, autos, China, the tech & telecom bubble, and more. As always, she also discusses fiscal policy, monetary policy, the economy, market signals, economic indicators, and innovation. We hope you find this monthly series useful, especially during periods of heightened volatility. Stay Healthy. Stay Innovative.
Tech Sell Off, Bubble Comparisons, China | ITK with Cathie Wood | January 7, 2022 | ARK Invest
(Excerpt) Read more at youtube.com ...
The deeper-dive China discussion starts at 31:45 in the above video, but I recommend watching all 45+ minutes of this one. Her remarks about the Turkish lira are interesting in the context of a real estate bubble bursting, since Turkey's actually gone through the very same cycle.
This one is more of a deep dive into the Chinese real estate bubble, which the vlogger compares with the Japanese crash of 30 or so years ago, most of us here remember it I'm sure. I remember picking up a Barron's at a local drug store and read how the market cap of the largest banks in Japan were declining in value *every week* by an amount that would *buy* any of the largest US banks. It was crazy.
Most of us probably also remember the xeno-jingo book by a Japanese chauvanist, "The Japan That Can Say No" (came out around the time, or a little before, Toshiba's sale of tech to the Soviet navy).
So much for that.
This guy has a tighter focus, but again, I recommend watching all of Cathie's, bigger picture, integration of concepts, and of course, expertise.
Cathie Wood: China Has Already COLLAPSED! You Just Don't Know It Yet... | December 7, 2021 | Stoic Finance
Ms. Wood needs to focus on the bloodbath that are her current ETFs. They are down on the order of 60% right now.
Crude futures just topped the $83. level.
Let’s Go Brandon
OPEC allowed Russia a production boost, but Russia hasn't been able to take advantage of it.
Her ETFs will be fine. Her two largest holdings are TSLA and ROKU, both are off their highs. Shopify is in that list as well, and it’s turned down. But investing is long term.
Waiting For Godot: US Inflation Jumps To 7% YoY As Real Hourly Earnings Growth Crashes To -2.32% (Taylor Rule Now 17.84% Versus Current Fed Funds Target Rate Of 0.25%)
Confounded Interest | 01/12/2022 | Anthony B. Sanders
Posted on 1/12/2022, 8:55:52 AM by Browns Ultra Fan
Comparison with Japan is just wrong - the two cultures could not be more different ; westerners have been familiar with Japan since WWI, but China is not Japan and the rules are very different.
Missing is the why men buy these crappy apartments (usually going for US$1.5 million) - owning property is the first step in getting married - without which the families will not approve of the marriage. The money comes from the man's family, loans and salary.
Here's some of the more pertinent comments on the site :
An important element that wasn't mentioned in the video is local governments. The property developers were buying property from city governments. The city governments were using that income to finance their operating costs, since they have no taxing authority. They actually relied on property sales to purchase goods and services and pay employees. (city governments are the CCP).
They had a strong incentive to help property developers sell those empty apartments, so the developers could buy more property. With the property developers going out of business, that income is cut off, and they are not able to pay employees, or their own suppliers. (Apartment buildings are often if not always sold before actual construction begins ; sold apartments are for sale all the time ; there is little privacy due to all the prospective buyers showing up every day.)
Government employees (CCP party members) with any type of power will use that power to plunder residents and businesses (through bribes and fines, for instance) to make up for that lost income, while using their control over the media to cover it up and stifle dissent, and keep people from complaining to the CCP.
Although I agree that the Chinese property market is a gigantic bubble, I doubt it would burst in a way that we are familiar with in the West. The analysis in this video is logical, but it is based on a somewhat false assumption that the property market in China operates in the same way as that in the US or Japan. (??)TL;DR(??) it would be a long, slow, but tightly controlled decline. Just a few points:
1. The property market in China is not at all free (I wouldn't even call it a real market). The Chinese government (The CCP) controls the property market at almost every corner. They can control the number of apartment units one can buy/sell and at what city and at what price range. (The CCP actually owns all property and just resells it to developers or Party members in city governments for 70 years, then control reverts back to the CCP to resell again.)
They can also force developers to do anything at their bidding. If they wish they can nominally "stop" a fall in real estate prices by stopping all sells - they have done it to "stop" speculative housing price increase before.
2. The whole Evergrande saga was not started by a change in market sentiment, but rather an attempt at controlled demolition by the Chinese government to force property developers to lower their debt ratio through a change of financing rule. They deliberately killed Evergrande as an example to others.
Also the whole notion of property developers selling real estate assets to resolve debt is not really applicable in China, because in the last decade they usually sell all units before they even break grounds. In the case of Evergrande, the CCP actually had to force Evergrande to deliver all apartments that are still under construction while resolving their debt.
3. A large part of the value of property in China has nothing to do with the property itself, but rather the notion of "hukou", which forces you to buy your residence in a particular place if you want access to good schools, medical care, a car tab, or even the local public pension, all of which are highly competitive and controlled by the Chinese government (The CCP) .
People would buy a 30-year-old toilet-sized crap of an apartment in the right part of Shanghai for half a million bucks just so that their kids can attend a competitive school. The crazy housing price is not just driven by price speculation, but also other things that can be manipulated by the government.
4. The personal bankruptcy/default law in China strongly deters individuals to stop paying mortgage and give the property back to the banks even when its value is severely under water.
The downside is so bad that the average Joe (or Li?) would usually try to scrap by the bottom of the barrel to keep up with the mortgage. They would be the one who pay the largest price for all this craziness.
Another video by 2 guys who lived there for 10-15 years explains the Evergrande collapse and how property actually works in China
Why Evergrande Collapsed - Our Chinese Houses Crumbled (2021)
Her portfolio is more volatile than Bitcoin.
She is smart and has interesting and original ideas.
But, at times like this, I always think about Mark Hulbert, who has studied the performance of professional investment advisors for forty years.
Since 1980, over any given ten year period, the S&P 500 index has out performed 80% of professional advisors.
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