Posted on 10/15/2011 10:21:46 AM PDT by Kaslin
Ruh Roh
gravity finally ketches up with slow leaking balloon of helium.
Just the banksters running the small specs out of commodities.
Every central bank in the world is spewing fiat like diarrhea and it’s going to go up in value?
Not for long... just generating a buying op for banksters.
When they have enough they abruptly stop buying until their inventory get low enough, which can many months or even years. Since they are secretive, suppliers never know if their goods are being consumed steadily or hoarded which makes it really hard to forecast demand.
This boom and bust cycle makes planning a sporting proposition and when customer are in a stockpiling mood , demand goes up, supply gets low and prices go up.
When they stop, demand goes to zero and prices plunge as the supplier gets stuck with a lot of unsold inventory.
It's Chinese thing. Unfortunately, China's economy is now big enough that this boom and bust style can seriously impact the world's supply and demand
Everyone is afraid that 2011 is looking like 2008, but the biggest difference is that China can no longer take up the slack in the world economy. The three biggest trade zones, Europe the US and China, are all slowing down again.
Not sure about silver, but gold should do okay and oil with the problems in the ME.
historically, there is usually a 2-3 year time lag from when real estate peaks, to when the economy crashes.
So, the guys like Jim Chanos who are short china now will be right eventually, but they may have to wait.
I'm not going to make investment advice, but I'd be real careful about commodities, including gold and silver, right now. We are on the edge of Greece and several banks collapsing. In such an event, many financial institutions around the world will have to pay off derivatives, and those derivatives are denomiated in dollars and euros. They will sell what they have to raise dollars and euros, including gold. One thing sovereign states have is gold, and when they go bankrupt, that will change hands too.
Cheers!
You must not be talking about Cupertino because the Chinese already own it. LOL.
Good advice! We're in uncharted territory and have good supply of the essentials on hand...
Not sure about that. The Chinese goverment has a lot of capital control regulations that prevent the money from just going where the investor wants(which is what we are starting to do). Thats why there was a huge housing bubble. 64 or more million empty apt units, whole cites with no one in them, etc.
I worked in Nortel’s Optical Network’s division in 2000. The boom in optical networks was intense and forecasts showed no end to the geometric growth. Credit was plentiful and Lucent would finance 125% of your needs. As demand got superheated, the suppliers put all the customers on allocation, ie, “we can only fulfill part of your order” and we aren’t sure when you’ll get the rest. That drove customers to greatly increase their order size to try to assure themselves they would get what they actually needed. The whole house of cards began to come tumbling down in August 2000 when we got the first hints of massive shortfalls of new sales and cancellations. All of our forecasts weren’t worth the paper they were written on and all the optical equipment manufacturers got stuck with huge unsold inventory and factory utilization rates plummeted. The rest is history.
So, it’s not just a “Chinese thing.”
Copper may be dipping short term, but Copper is a critical metal for modern devices. If the average Chinese person purchased electrical appliances ... this would create a mega surge in demand.
Thanks Kaslin.
This is why residential real estate in ‘greater Cascadia’ and Australia’s urban centers have not seen a real correction since the credit crunch, hot money flows from ‘emerging’ Chinese businessmen planning escape routes for themselves and their children.
The Professor Pettis article you linked to was a seminal “Aha” moment for me to understand the commodities bubble last year.
In the end though, the vast real estate and infrastructure development in coastal China WILL be utilized, though it might be “owned” by a different clique of China’s elites. Once this financial crash occurs, the marginal labor supply will increase rapidly again, driving down wages and increasing the supply of labor, and the cycle will start anew.
Thanks for the explanation.
This is the next great world power.
Thinking about copper, the amount of copper held in China is enough for about 30 million cars and 30 million houses. Which is less than 2 years of car production and I’m not really sure on housing starts.
The weak hands inside China will get shaken out, the real physical copper assets will be centralized in the hands of power and production, and the ability for the remaining Chinese manufacturers to undercut foreign competitors due to lower commodity input costs will prove beneficial once this business cycle reaches it’s trough.
Its not like this copper is going to slowly melt away into a green patina slag heap in some abandoned warehouse.
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