Using Veritas to Construct the "Per…

29-04-2017 Hits:8960 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:11728 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:11798 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:12769 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:13136 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:13976 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:8526 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:14371 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:14481 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:14639 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:15922 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:15853 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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I have another paper available for download outlining my China short thesis available for subscribers here: China Macro Discussion 2-4-10 China Macro Discussion 2-4-10 2010-02-04 13:10:26 922.25 Kb. 

In addition to the issue-specific ETFs (proffered (Chinese ETFs with Exposure to Real Estate, Banks, Insurance and Export Industrials) that I have already proferred, I will be offering my viewpoints on specific companies across various geographic regions as well.  Those ETF's have actually performed quite well on the short side YTD. For those who don't subscribe to my blog, here are some excerpts from the 11 page download:

Can China Control the “Side-Effects” of its Stimulus-Led Growth?

The strongest argument for a Yuan-revaluation relies on a basic tenet of economics: tinkle with prices and you disturb the resource allocation equilibrium prevailing in the economy. China’s endeavor to push economic growth through stimulus spending and its lax control over money supply has started to affect the “side effect” - INFLATION. The very contrivance used to maintain stability has become a threat to economic resurgence. And if there is one such thing that could force China to drop its dollar peg, it is out-of-control inflation.

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One of the major reasons for inflation in China is the rescue program initiated during the recent global slowdown. The Stimulus program aimed at creating a temporary demand within the economy has apparently worked wonders – aiding the Chinese economy to grow by a healthy 9% in 2009.  This program has apparently overheated the economy, gorging on what may become untamed GDP growth, currently 10.7% in 4Q09 - its fastest quarterly growth in two years - which was uncannily higher compared to the 6.1% growth in 1Q09, the lowest since the introduction of quarterly GDP figures in the fourth quarter of 1999. 

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On a real basis, China's equity markets closely track GDP. I would venture that a pullback of government stimulus and/or a spike in inflation or currency values will put the skids on export driven and financial equities. Let's explore this thesis...

china_money_supply.png

The unprecedented stimulus (as a % of GDP) has given rise to what I would consider an uncontrolled frenzy of economic activities, resulting in excess money supply within the economy while keeping the domestic supply of goods and services relatively constant in the short term. Though the growth rate may not be a concern and may even be maintained at the optimum level, demand, especially from consumers and investors will inevitably increase over a period of time driven mainly by the significant amount of domestic liquidity in the economy which also poses a risk of increasing prices. Money generally chases assets that provide the highest returns causing a stress on several such assets to the point of demand pull inflation or in other words, unwanted asset bubbles.

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According to a report issued by the People's Bank of China, the nation's commercial lenders pumped out RMB 9.59 trillion (US$1.4 trillion) in credit in 2009, almost double that of the previous year. China's Yuan-denominated individual home mortgage lending rose 47.9% from the previous year, to RMB 1.4 trillion ($204.98 billion) in 2009. Meanwhile, the Yuan-denominated property development lending gained RMB 576.4 billion in 2009, up 30.7% y-o-y. The total mid-term and long-term loans in foreign and domestic currency increased by RMB 7.1 trillion in 2009, up 43.5% from the previous year, and the growth rate was 23.4 percentage points more than the previous year.

These liberal credit policies adopted by China over the past four to six quarters have flushed the economy with excess money supply. The current rate of production has not been able to cope with the rate of the increase in demand for these goods and services creating a scenario where excess money has been chasing limited goods and services, leading to excessive inflationary pressures.

Further, easy availability of funds have rapidly increased the demand (investment) in real estate. As mentioned earlier, real estate is considered a high return asset, which attracts money. The result: home prices in 70 major Chinese cities jumped 7.8% on average in December 2009 when compared with December 2008 - the steepest climb in the past 17 months. 

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Another key factor that has continuously driven the money supply is the growing foreign exchange reserve which in turn is driven by foreign trade surplus, foreign direct investment and “hot money inflows”. At the end of 2009, China's outstanding foreign exchange reserves reached USD 2.4 trillion, soaring 23.28% or USD 453.1 billion y-o-y. Moreover, as per industry observers out of the total increase of USD 453.1 billion, the annual increment of about USD 167 billion is over and above the sum of the country's foreign trade surplus and foreign direct investments. Of this USD 167 billion, it is estimated that at least USD 100 billion relates to hot money, which is a concern for the economy as growing hot money inflows are propagating an asset bubble, which if left uncontrolled could burst upon the inevitable hot money rush to the exit.