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They Made A Mistake Investing Here

A report from the Wall Street Journal on China. “When she was a teenager in the 1970s, Zhou Xiaoguang peddled trinkets city to city and slept on trains, a formative chapter in her creation of the world’s largest costume jeweler, Neoglory Holdings Group Co. Leveraging her empire of baubles, China’s ‘fashion-accessory queen’ added hotels, offices and malls, and erected the tallest skyscraper in Yiwu, a trading city south of Shanghai.”

“Now, China’s economic slowdown is making Ms. Zhou known for something else: her billions of dollars in debt. A bankruptcy court in April said Neoglory ‘is unable to repay a due debt, has insufficient assets for repaying all its debts and is apparently insolvent.'”

“For a generation, China’s explosive growth rewarded bold expansion and many borrowed heavily to seize the moment. In the past decade, China’s overall debt quadrupled, to around three times the value of last year’s national output. Corporate debt accounts for two-thirds of the total, or more than $26 trillion last year, according to the Bank for International Settlements.”

“Many Chinese entrepreneurs tend to ‘borrow as much as possible, even if the core business doesn’t need it,’ said Joseph P.H. Fan, a professor of finance and accounting at Chinese University of Hong Kong. China’s top-down system showers successful entrepreneurs with new business opportunities and the political backing to get them done, he said. It is a winning strategy to capitalize on the boom times—but doesn’t offer much shelter in a slowdown.”

“The private company reports only selective financial information, such as through a listed subsidiary. Property unit Neoglory Prosperity Inc. reported a 215 million yuan loss for 2018 and said it was owed over 4.2 billion yuan from the parent company. Professor Fan got to know Mrs. Zhou while researching private wealth in China. Neoglory, he said, is a textbook example of China’s ‘misallocation of financial resources.'”

“Neoglory added villa and apartment projects, financed by bonds. The company doubled its real-estate holdings to 30% of assets. Ms. Zhou’s bulk-up on property was late. By the time she dedicated Neoglory’s 362-room Shangri-La Hotel with a sketch of peacocks in June 2017, her first bond was nearing its expiration. To repay bondholders, Neoglory is trying to shed property and stakes in financial firms, according to regulatory statements. Lights on the Shangri-La spell ‘For Rent.'”

“At Neoglory Place mall, abandoned shops far outnumber going concerns. Over sunflower seeds and tea outside 29-year-old Shan Qingqing’s fashion boutique on a recent afternoon, many of the remaining merchants were sealing plans for a rent strike. Ms. Shan hadn’t rung up a sale since the previous week. ‘They made a mistake investing here,’ she said.”

The Vancouver Sun in Canada. “With the first half of 2019 in the books, local realtor Barry Magee reviewed sales data from the Real Estate Boards of Greater Vancouver and the Fraser Valley. He said he expected to see a slowdown given the market recently. But the extent of that plummet, Magee said, was striking. In Greater Vancouver and the Fraser Valley, the combined value of properties sold in the first half of 2019 was $15.6 billion, less than half the total of $38.1 billion recorded over the same period in 2016, at the market’s high point.”

“This week, the Real Estate Board of Greater Vancouver’s monthly report showed its benchmark price for homes in Metro Vancouver fell below $1 million for the first time in two years, and reported the lowest June sales numbers in almost 20 years. ‘I do think it’s a good thing, in my personal opinion. I’m firmly on the side that lower prices are better for society in general,’ said Magee. ‘It’s really just coming back down to reality.'”

“Magee agrees that Vancouver’s boom in recent years was largely driven by external demand. ‘It is incredibly clear that money earned outside of our economy was driving the unprecedented real estate market from 2015 to 2017,’ Magee said. ‘Anyone who argues against this, after seeing $22.5 billion disappear from the market, must be financially, and emotionally, motivated by selling misinformation. The debate is over.'”

From ABC News in Australia. “Twelve per cent of Australian properties were resold at a loss — compared to what the sellers had paid for them — in the first three months of 2019. It was the highest level of loss-making sales in six years and another sign of weaker property market conditions, according to the latest ‘Pain and Gain’ report by property analysts CoreLogic. This was also a marked increase from 10.5 per cent (in the December 2018 quarter), and 9 per cent (in the March 2018 quarter).”

“‘Australia had a total of $486.8 million in realised gross losses from resales over the March quarter, with highest share of losses nationally seen in Perth (24.8pc) and Sydney (19.9pc),’ CoreLogic analyst Camer Kusher wrote in his report. The weakest property market in the March quarter was, by far, Darwin — 58.2pc of apartment vendors sold for a loss, compared to 40.8pc for house vendors. It was followed closely by losses in regional Western Australia (apartments: 47.4pc, houses: 37.3pc) and Perth (apartments: 49.2pc, houses: 28.8pc).”

The Sydney Morning Herald in Australia. “Up to a third of homes in parts of Melbourne and Sydney are being sold at a loss with the rate likely to climb higher as a combination of falling prices and owners wanting to offload their properties is wiping hundreds of millions of dollars from the market. Loss-making sales hit a six-year high in the March quarter with almost 32 per cent of dwellings in central Melbourne being sold below their purchase price with a median loss of $44,000. A year ago the loss-making rate was under 28 per cent.”

“It’s not just the city centre where owners are selling at a loss. Through the eastern suburbs, the loss-rate has doubled to 12 per cent or more in Glen Eira and Boroondara, and reached 24 per cent in Stonnington. Parts of Sydney have been particularly hard hit. In the March quarter last year, just 1.3 per cent of properties in Strathfield were sold at a loss but this hit 20 per cent during the first 3 months of 2019.”

“A year ago not one property sold across Botany Bay was sold at a loss. In the March quarter this year almost 14 per cent were with most being held for less than three years. Lane Cove (15.2 per cent), Canterbury-Bankstown (13.8 per cent) and Ryde (15.7 per cent) also recorded some of the highest loss-making rates in the city, and the loss rate in Parramatta has soared from 5.8 per cent to now sit at 18.8 per cent.”

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    1. ‘Twelve per cent of Australian properties were resold at a loss — compared to what the sellers had paid for them — in the first three months of 2019.”

      At least it was cheaper than renting.

  2. ‘Anyone who argues against this, after seeing $22.5 billion disappear from the market, must be financially, and emotionally, motivated by selling misinformation. The debate is over’

    Ladies and gentlemen, the biggest ass-hole in Canada:

    What if it’s not a bubble? – Real Estate Marketer Bob Rennie
    Published on May 22, 2012

    https://www.youtube.com/watch?v=NCSIg51DLDk

    1. Time to trot this one out again: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” – Upton Sinclair

    2. It was not a Black swan event. Somebody else had stated it would not be, I agreed but was too busy posting other comments to comment

      1. Just think the Nationwide average for houses in Germany is over nine times average wages. I am sure cities are much worse than small towns. I wonder how many outstanding mortgages it has on its books.

      2. So was Enron, until the day it collapsed in a pile of financial ruin and wrecked careers.

  4. Another timeless quote worth repeating here, since the folly of man is once again reasserting itself on a massive scale in the financial markets.

    “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

    1. Don’t worry, the people running things now are much smarter than those guys back then. The US dollar is perfectly healthy and everything is under control.

      /sarc

    2. Zombie firms are the embodiment of the Ponzi borrower
      From Minsky’s wikipedia page:
      If the use of Ponzi finance is general enough in the financial system, then the inevitable disillusionment of the Ponzi borrower can cause the system to seize up: when the bubble pops, i.e., when the asset prices stop increasing, the speculative borrower can no longer refinance (roll over) the principal even if able to cover interest payments. As with a line of dominoes, collapse of the speculative borrowers can then bring down even hedge borrowers, who are unable to find loans despite the apparent soundness of the underlying investments

  5. “I do think it’s a good thing, in my personal opinion. I’m firmly on the side that lower prices are better for society in general,’ said Magee. ‘It’s really just coming back down to reality.’”

    – Couldn’t have said it better myself. This coming from a realtor. May you live in interesting times.

  6. From PRESTO! …

    “When she was a Leveraging her empire of baubles, China’s ‘fashion-accessory queen’ added hotels, offices and malls, and erected the tallest skyscraper in Yiwu, a trading city south of Shanghai.”

    To POOF! …

    “Now, China’s economic slowdown is making Ms. Zhou known for something else: her billions of dollars in debt. A bankruptcy court in April said Neoglory ‘is unable to repay a due debt, has insufficient assets for repaying all its debts and is apparently insolvent.’”

    1. She better get used to sleeping on trains and peddling trinkets from town to town again.

    1. Xi is a stubborn man but he has to know that in China you often do not just lose your job when you fail, you lose your life. He knows he made a big mistake by not taking the Trump proposal of 2018. It made far less structural demands than now. He was talked out of accepting it by American advisors who have never been identified who told him Trump will cave. I would like to know whether they were Globalists or just Partisan Democrats but they hurt US interests. I read it in a MSM publication about six months ago but cannot remember which one.

      1. “He knows he made a big mistake by not taking the Trump proposal of 2018.”

        Maybe you have better information, but I thought U.S.-China trade negotiations were still pending?

        1. They are still going but the article I saw in January stated he already knew he made the mistake because contrary to the advice he was given Trump did not back down he imposed the tariffs and it has severely damaged China’s economy. Just how is any new agreement going to on do that? Trump was willing to settle for just a massive shopping spree in 2018 hard to see China getting a better deal than that.

          1. Ask me if I care if China is having some stress. They should of known the gravy train wouldn’t last forever.

            Our manufacturing and job based was gutted while China prospered.. For the life of me I don’t understand why our politicans would do what the Fat Cats no doubt wanted when it was so destructive to our jobs here.

            On top of everything else the China made stuff is junk.
            They have over a billion people to sell to in their own Country.

        2. All hail trump, the mighty debt king who seems to do no wrong for some.
          Now, talk to a farmer.

          2. Now, talk to a farmer.

            The only shame in falling crop prices is that they were subsidized to begin with.

          4. Nothing to do with Trump.

            I was always a tariffs person, look at my posts on this blog 12 years ago.

          6. Weren’t Farmers a large part of his electorate?

            Not that many left. But yes, a lot of his base is only 1-2 generations away from the farm and still lives close to farm country.

  8. It’s the 2019 story that keeps on giving!

    ‘The Incredible Disappearing Bond Yields’
    By Ritvik Carvalho
    Reuters
    July 8, 2019, 6:37 AM CDT

    LONDON, July 8 (Reuters) – The past week has seen world bond markets reach new milestones, completing a collapse in borrowing costs for governments across the globe over the last 6 months.

    The following graphics track the disappearance of yields and flattening of maturity curves across government bond markets this year:
    …

  9. A year ago not one property sold across Botany Bay was sold at a loss.

    Botany Bay?!?!?!?!

    Anybody here familiar with the original Star Trek? That was the name of the ship that Khan originally escaped earth on with his team of 0.01 percenters after they were unable to hold onto power. It was an important part of the entire series storyline and a funny thing to name your project. I wonder if it was intentional?

    1. I believe Botany Bay was supposed to be the first Penal colony in Australia when people still went to prison for not paying debt so that makes it an even more interesting choice.

  10. How can we support trump trade wars all the while taxpayer on the hook for $27 billion in farm bailout…(so far)
    “Time Mag: Trump’s Trade War Is Costing Americans $3 Billion a Month in Higher Taxes, Study Says.”
    yipppeee!

  11. OT, when the Jeffrey Epstein story is so big it’s a leading article on the New York Times website, it’s too big to ignore (a la NBC kicking the can on Harvey Weinstein until Ronan Farrow published his expose in the New Yorker magazine).

    “This sucker could go down” — George W. Bush

    1. Previously he plead guilty to sex with a minor. This charge is sex trafficking. I heard on the radio today the Justice Department is looking at the arrangement he got last time too (gets to leave prison all the time, etc). I bet Bill is sweating today.

      1. Those 26 (documented) trips Bill Clinton took on the Lolita Express, often ditching his Secret Service details, were surely part of a private rescue mission to rescue wayward underage girls from Epstein’s clutches and place them in loving forever homes.

        1. What other explanation could there be? After all Preet Bharara Obama’s US attorney for the Southern District of NY would have prosecuted to the fullest if that was not the truth. Too bad that evil Trump fired him and appointed Geoffrey Berman who is overseeing the people bringing these charges

        2. Seems like these ladies, from the Spring chickens to Stormy Daniels, who sold their honor for an agreed price are angry 10-yrs later and desire much more compensation. WTF?

          1. who sold their honor for an agreed price

            What part of sex trafficking of minors do you not understand?!

        3. This is the only thing I ever cite from Breitbart; it’s the original source:

          Erik Prince: NYPD Ready to Make Arrests in Anthony Weiner Case

          “They found State Department emails. They found a lot of other really damning criminal information, including money laundering, including the fact that Hillary went to this sex island with convicted pedophile Jeffrey Epstein. Bill Clinton went there more than 20 times. Hillary Clinton went there at least six times,” he said.

          2. The media is painting a one-sided story that reads like the flying monkeys yanked these innocent teens from their loving homes leaving behind only a Barbie doll and hair brush.

            The reality is that many of these young women have realized their feminine power too early and have sharpened their wile. They’re busy doing drugs, smoking, scantily clad, out all evening, social media, riding the co*k carousel, etc., and not willing to listen to mom, so they move-out. I spent years repossessing cars from section-eight apartment complexes, and rolling through these places in the early hours was like visiting a bazaar in the seedy district with drugs, sex and stolen property…all for sale. Of course it is sad to see young teens, both female and male, take this route in life as many will never become productive and will rely on society’s charity.

      2. Bill & who knows how many more. There may be a lot of swinging dicks that are nervous right now. If Epstein sees conviction inevitable, he may sing like a canary to get some kind of reduced sentence.

      3. Maybe someone will get 50% off at a govt auction on a 72 acre private island in the Caribbean. Just don’t let the dogs go digging things up. The only bipartisan aspect of life in Washington DC is the pedo perv network. If we can find a way to identify and round up the compromised pedo pervs, I think we’d be more than halfway to solving our country’s problems. A lot of other issues would take care of themselves.

        1. I agree. I think Globalists are backing many for political office since they are so easy to control

      4. the Wash post is full of crap about Epstein having some connection to some Trump official (cabinet official.). Not a WORD about Epstein being a Friend of Bill.

        1. Bezos protecting the people who are protecting him? Welcome back Oxide I hope you were not impacted by the storm.

        2. “…being a Friend of Bill.”

          Bill’s only friend is a dog, and his acquaintances seem to die before their time.

    3. Democracy Now interviews an investigative journalist who says Epstein should’ve gone down for his crimes against underage girls in 2003, but as a member of the oligarch he had plenty of accomplices and friends in high places who made sure he was untouchable. It’s ironic that the FBI’s “Public Corruption Unit” are the ones who collared him – who know the FBI had such a unit, given its proclivity to turn a blind eye to the really big criminals since it was corrupted and co-opted by the globalist elites during the Obama Administration.

      https://www.democracynow.org/2019/7/8/jeffrey_epstein_a_billionaire_friend_of

      1. Without going all “Alex Jones” on the topic, suffice it to say that such activities are usually associated with deep spiritual evil and, in this world, victory over its purveyors will not be easily won.

    4. I always wondered how Prince Andrew skated after the photo of his arm around an obviously too young for him Virginia Roberts was published years ago.

      This was the only article I could find today with that photo in it.

      EXCLUSIVE: Alleged ‘sex slave’ of Jeffrey Epstein, Prince Andrew accused 2 men of rape in 1998, but was found not credible

      By OREN YANIV
      | NEW YORK DAILY NEWS |
      FEB 23, 2015 | 2:30 AM

      https://www.nydailynews.com/news/world/sex-slave-prince-andrew-accused-2-men-rape-1998-article-1.2125569

        1. “Because she was prostituting herself?”

          The woman in the picture behind Prince Andrew who has his arm around 14 year old Virginia Roberts is Ghislaine Maxwell.

          What We Know About Ghislaine Maxwell, Jeffrey Epstein’s Alleged Madam

          By Amanda Arnold
          9 hours ago

          She’s been accused of recruiting and grooming girls and women into Epstein’s alleged sex-trafficking ring.
          According to multiple court filings reviewed by the Miami Herald, lawyers for one of Epstein’s alleged victims have claimed that Epstein and Maxwell acted as the leaders of an “organized crime family” and that Maxwell helped traffic girls and women to powerful figures. Per the documents, Maxwell lured the alleged victims into the sex ring by offering them modeling, fashion, and educational opportunities.

          https://www.thecut.com/2019/07/ghislaine-maxwell-jeffrey-epstein-alleged-madam.html

          1. “Per the documents, Maxwell lured the alleged victims into the sex ring by offering them modeling, fashion, and educational opportunities.”

            In college, a classmate and I were walking to the next class when we passed an attractive woman who wheeled her head looking at my friend without stopping. My friend smiled and said, “she was a stripper at a friend’s bachelor party.” Opportunity!

    5. Epstein’s contact book included Alec Baldwin, Tony Blair, Mike Wallace, Charlie Rose and the Solomon Brothers Chief Executive John Gutfreund according to MSN. Seems like the more you attack Trump and promote globalism the more likely you are on a pedophiles buddy list. Interesting.

      1. Sorry certainly did not want to exclude one of the Koch brothers from that list. In fact I meant to emphasize it

      1. “1990: Savile is knighted, also receiving a papal knighthood.”

        Well of course he got a Papal Knighthood. Look at his accomplishments, molesting all those kids

    7. Also the story mentions Geoffrey Berman’s role in the investigation. Remember how the elites were upset when Trump appointed him instead of reappointing the existing US attorney? Trump’s election may be unraveling the largest and most powerful pedophile ring since the Roman Empire.

      1. Remember how the elites were upset when Trump appointed him instead of reappointing the existing US attorney?

        From Wikipedia:
        “Geoffrey Steven Berman (born September 12, 1959) is an American lawyer serving as the United States Attorney for the Southern District of New York since 2018.[1] He previously served as an Assistant United States Attorney for the Southern District of New York from 1990 to 1994. In January 2018, U.S. Attorney General Jeff Sessions announced Berman’s appointment as interim U.S. Attorney for a statutory period of 120 days.[2] On April 25, 2018, the judges of the Southern District of New York, pursuant to the statute, unanimously appointed Berman U.S. Attorney for an indeterminate term that expires upon the appointment of a Presidential nominee approved by the Senate.[3][4]”

        Seems like a strategic maneuver by Sessions/Trump to bypass the Senate’s approval for a crucial position.

  12. Is rule of law coming back to America? If so many rich and powerful people need to worry.

  13. Time Magazine is a digital rag. Taking on China is 25 years overdue and contrary to the Globalists most of the tariffs are being absorbed by China. Thus, $80 billion dollars or more in revenue to pay the Farmers $27 billion. I love wars which pay for themselves. Pretty rare but they are great.

    1. “revenue?” At least you see taxpayers gets the bill.
      Or do you think China is paying us? Seriously.

        1. Xi is stamping his little feet right now and saying take the tariffs off right now you are not treating us as equals.

      2. Yes I do, let me explain it to you one more time. Let’s say before the tariffs I was paying $80 dollars for an item from China. Now after the tariffs I am still paying a total of $80 dollars for the item even after I cut the $20 check for taxes to the US government, due to the Chinese manufacturer cutting the price to compete with Vietnam. Technically yes I am paying the tax but in reality the Chinese are paying the tax. I do not know why this is so difficult for someone to understand unless he or she is suffering from TDS.

        1. unless he or she is suffering from TDS

          Enough evidence to suggest WestWorld5’s case is incurable.

  14. My Realtor just called me a crybaby and told me I can stamp my feet all I want, but it won’t change the real estate game and the money to be made. I am so lost.

    1. What does the loss of $23 billion in sales do to the YVR REIC in lost commissions and businesses tied to Real Estate?
      It’s as if a 7.1 hit the industry.

    1. Apt. 401,

      Look, I kinda liked that tape you posted the other day by the military analysis. But, is this music you post what the young people like?

  18. The excerpt from a long and thoughtful piece posted below can be summarized in three words of advice for Eurozone stock market investors:
    SELL EVERY RALLY!

    Luckily American investors can safely ignore this advice, as IT’S DIFFERENT HERE.

    The Financial Times
    Opinion Markets Insight
    Investors in Europe should hunker down for trouble ahead
    High asset prices are too detached from economic fundamentals
    Mohamed El-Erian
    …
    Rather than seeing a pick-up in economic activity, the continent is being threatened by what has become known as “Japanification”: a mix of low yields, sluggish growth, low inflationary expectations and greater worries about the ineffectiveness of policymakers’ dwindling tool kits.

    At the same time, the risks to medium-term financial stability multiply, due to the gap between elevated asset prices and more sluggish economic fundamentals, and excessive risk-taking in both the investor and debt-issuing communities.

    The longer this continues, the greater the probability of that dreadful combination of falling asset prices, credit rationing, strained liquidity and obstacles to repositioning investment portfolios and debt structures — all of which would spill back into even weaker growth.

    Long-term European investors should therefore take advantage of the liquidity-driven surges in asset prices to bolster low cash positions, not only to reduce overall risk but to give themselves dry powder to take advantage of dislocations that tend to damage markets in an indiscriminate fashion.

    They should also trade up in quality in corporate and sovereign holdings by focusing on issuers with stronger balance sheets and more diversified business models, while shifting from passively to actively-managed strategies for exposures to less liquid market segments.

    Finally, they should diversify some of their European investments to other jurisdictions with stronger fundamentals, which are also less exposed to weakening international trade.

    Mohamed El-Erian is Allianz’s chief economic adviser and president-elect of Queens’ College, University of Cambridge

  21. canadah n australia and NYC have been crashing for years.
    is this a 1990s redux or what ?

    1. “The greedheads of Manitou Springs, CO…”

      Living at the edge of wilderness, I imagine they encounter desperate wildlife during the drought season.

    2. The last time I was in Manitou Springs, in 2017, it seemed to be mostly full of potheads.

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