Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:502 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:880 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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It's the Real Estate Crash That I Warned…

20-03-2017 Hits:1306 BoomBustBlog Reggie Middleton

It's the Real Estate Crash That I Warned You About (again)

I've issued several warnings late last year warning of the real estate bubble peaking and popping. I feel I'm especially qualified to do such since I quite accurately called the...

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When It Comes Time To Show and Prove, Eq…

20-03-2017 Hits:1130 BoomBustBlog Reggie Middleton

When It Comes Time To Show and Prove, Equity Markets May Drop Hard

The markets have gotten euphoric since the Trump election, apparently because someone believed what he was selling. Take a look at the broad market jump (powered greatly by the bank...

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So, Brexit Is Now Almost Official. Is Th…

20-03-2017 Hits:503 BoomBustBlog Reggie Middleton

Note: All downloadable legacy content is for subscribers only. We currently have a sale for $11 per month for basic access. Professional subscribers are now evevated to have direct access...

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In Less Than Two Weeks, Another Bitcoin …

17-03-2017 Hits:1920 BoomBustBlog Reggie Middleton

In Less Than Two Weeks, Another Bitcoin ETF Faces SEC Deadline - It's Denial Is NOT A Bearish Event

LedgerX's "SOLIDX BITCOIN TRUST" has an approval deadline this March 30th, 2017.If it is approved, Bitcoin is due for one hell of a bump, but...  

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The Fed Raises Rates While Still Baby Fe…

17-03-2017 Hits:1765 BoomBustBlog Reggie Middleton

The Fed Raises Rates While Still Baby Feeding the MBS Market With Billions in Monthly Purchases

The Fed has raised rates, officially making real what was mere signaling of the end of its expansionary era... Or is it? You see, from a practical perspective, QE is...

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A Bitcoin ETF or Similar Regulated Insti…

16-03-2017 Hits:2300 BoomBustBlog Reggie Middleton

A Bitcoin ETF or Similar Regulated Institutional Vehicle is a Forgone Conclusion - What Happens Next?

Someone with over 53 years on Wall Street sent me this article from Lex of the Financial Times...

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Why the Winelvoss Bitcoin ETF Was Reject…

13-03-2017 Hits:3114 BoomBustBlog Reggie Middleton

Why the Winelvoss Bitcoin ETF Was Rejected and How to Create a Regulated Vehicle That Passes Muster

 The Winkelvoss ETF application was rejected by the SEC, and bitcoin dropped about 20% in price. I repetitively warned those that followed me that a very low risk buying opportunity...

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Trump Calls Obama's Policies On Russia W…

10-03-2017 Hits:2803 BoomBustBlog Reggie Middleton

 Donald Trump's recent Tweet discusses how Russia has gotten stronger at the behest of President Obama.   For eight years Russia "ran over" President Obama, got stronger and stronger, picked-off Crimea and...

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SNAP's Greed Derived Self-Inflicted Woun…

08-03-2017 Hits:3861 BoomBustBlog Reggie Middleton

SNAP's Greed Derived Self-Inflicted Wounds Continue to Manifest

The day before the SNAP IPO, I penned "Goldman Sachs & Morgan Stanley Pull Off the Heist of the Decade, Bends Over Those Who Don't Read BoomBustBlog". Despite being rather...

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Bitcoin Is Reaching the Point of No Retu…

08-03-2017 Hits:3591 BoomBustBlog Reggie Middleton

Bitcoin Is Reaching the Point of No Return - Buy Side Should Take Note

Many bitcoin aficionados are waiting with baited breath as the SEC is to announce by this Friday whether they will approve the first registered bitcoin ETF. This is not the...

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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...

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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.