A Peak Under The Hood will be dedicated to providing unique insights into macro topics happening around the world and how these topics may affect financial markets. We will try to provide an entertaining, but informative blog, on subjects ranging from Real Estate, Mortgage Markets, Commodities, Major Stock Indexes, Bonds, and Select Trading Ideas. Our site will contain original posts, charts and also include opinions from outside investors and reporters who furnish original thoughts. We will attempt to dig deeper than what can be found on major network financial news outlets and it is our hope that you will continue to visit the site as we provide intelligent analysis that may be counter intuitive to mainstream ideas.

Sunday, March 27, 2011

Video On China Ghost Towns: Field of Dreams Theory: 'Build it and they will Come."

China continues to grow rapidly, though through government sponsored construction projects. 

China is living on the Field of Dream Theory of 'Build it and they will Come.'

'They' being buyers.  'It' being massive skyscrapers only elitist speculators can afford.

China has 2 major problems:
  • Oversupply and continuous building based on 'expectations' of future growth, and;
  • No organic owner-occupant buyers due to rampant over valuation due to speculation
When China's bubble bursts, they may have buyers, but the prices will have to fall to near zero for the majority of working Chinese to afford to occupy these new housing units.  When will this happen?

It is happening now-- slowly, but surely.

China lending down and rates rising.  Money supply continues to rise but at a much slower rate than previous.  This should continue as China raises rates and reserve requirements to try and fight off food and energy inflation.

Grab the Popcorn:

Here is a great, yet lengthy, video on China's property bubble.  It is well worth your time today.

Housing prices are indeed out of control in China...

Massive price increases with no income growth
According to a survey by the Taiwan Real Estate Research Center released last month, housing prices in Taipei city have soared 73 percent over the past five years, but average household income has risen by only 1.2 percent.
Everything is sunshine and cookies however..for now, that is...

Build it and They Will Come... if they don't come, build more and GDP will follow.

If nothing else, the fire sale that follows the bust will be amazing!

1 comment:

  1. Anyone who believes in the Chinese miracle is delusional. Their bubble is far larger than anything the west had a couple of years ago, and the fallout, when it bursts, will be epic. But, that could still be years away, as the Chinese government will postpone it for as long as possible.

    The question is how will this affect the rest of the global economy.. Certainly natural resource prices and exporters will take a hit. But since China doesn't have a large consumer class, it's possible that the rest of world will merely shake their heads as China goes through the same thing that Japan did in the 80s-early 90s...