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Roubini is one of the few renown economists that I can vibe with. He has been lockstep with me on my views of real estate recession, and he is also in agreement with my views on global contagion and re-coupling (more accurately, I never believed we decoupled in the first place). To get an idea of how I am investing my modest amount of money, read For those who feel the world has decoupled from the US economically - and in the financial markets, I bring you “The Great Global Macro Experiment” , for it explains how the US exported its proprietary brand of asset inflation and hyper-growth activity to the rest of the world. This is what got me into real estate investing, to begin with. The issue is, with every boom there is the requisite bust. This is what got me into shorting real estate. The opportunity lies in the fact that many, till this very day, fail to understand the extent of the upcoming real estate bust, and fail to understand the linkages that will export this bust to the rest of the world. It has already spread from residential real estate to mortgages and derivative finance. Commercial real estate is up next (reference my first post on this blog in September), then the large retirement funds, then the full blown export to the rest of the world via the realization after this Christmas holiday that the US consumer will no longer support the world's extra normal growth. Which financial market and economy is most bubbliciously inflated, and set to fall the most??? You smart guys have guessed it, the Asian economies being led by China. European financial an real assets are to be routed along the way. This graph from Calculate Risk gets the prize for the "picture is worth a thousand words" contest.

So, there you have it - an outline of my investment activity for the next fiscal quarter.

From the Roubini site:

This analyst started arguing against the "decoupling" hypothesis in the summer 2006; see 12 Reasons Why the World Will Not De-Couple From the Coming U.S. Growth Slowdown…Or “Why When the U.S. Sneezes the World Gets the Cold”…and The Fairy Tale that the World Will "Decouple" from the Coming U.S. Recession...

I elaborated my views in the recent Global Recoupling Rather than Decoupling as the US Heads towards a Recession While there I discussed how Europe will not decouple from the U.S. hard landing the argument holds a fortiori for China, Asia and other emerging market economies.

Paradoxically China is the one country that has, so far, decouple the most – both in real and financial terms from the U.S. but it will also be the first and most serious victim of a U.S. led recession. The decoupling of China is clear as its growth rate has not decelerated, in spite of the U.S. slowdown, and its financial markets have – so far – blissfully avoided (thanks in part to its financial system partially isolated via capital controls from the global one) the turmoil and volatility that hit the US and Europe since the summer. But the reason for the Chinese growth decoupling is that, until recently the US slowdown was still modest (short of the coming hard landing) and it was not concentrated in private consumption but rather housing: China is mostly exporting low-priced consumer goods to the U.S. and the re-coupling of China will occur soon once the US consumer recession is in full swing. Thus, the biggest victim of a US consumer led recession will be the country – China - that, so far, has decoupled the most from the US. And for China a fall in its growth rate from 11% towards 6-7% would be the equivalent of a "hard landing" as China – to maintain its social and political stability given its widening income and wealth inequality – needs to grow at least 10% a year in order to move about 15 millions poor farmers from the rural to the urban and industrial sector every year. No wonder that Chinese officials have started to express serious concerns about the current sharp slowdown in Chinese exports to the US, from an annualized growth rate of over 20% in Q1 to a rate of 12.4% in Q3 of this year ("If demand in the US drops further, Chinese exporters will be devastated by a rapid and continuous fall in orders," a Chinese official report said).

And once there is a sharp growth slowdown in China the next victims of this re-coupling will be East Asia and commodity exporters.