Speaking of China, at least one additional market analyst has gone on record to say that he expects that country’s property bubble to pop, and soon (as in: within 12 months). Gillem Tulloch, Managing Director of Forensic Asia Ltd. in Hong Kong, believes that the withdrawal of the “credit opium” by China’s banking system will result in a situation where renting is suddenly more enticing than buying. The more than 11 trillion yuan that China’s banks pumped into real estate via loans last year could shrink significantly this year.
That phenomenon, Mr. Tulloch opines, will be the catalyst for the bubble’s implosion. Chinese property prices continue to rise, even as residential vacancy percentages approach alarming levels (some 60% in Beijing alone). If you think that steel, copper, aluminium, etc. will be funneled into non-stop additional building in the wake of what Mr. Tulloch expects will happen, you might wish to delve into a borrowed copy of “Supply/Demand Fundamentals 101” sometime this weekend.
Since we are on the topic of bubbles, it might be worth noting the following, clearly ‘buried’ little news items. Obscure as this news is, there something of a cautionary tale to be gleaned therein. Enter the Glassmakers versus the Dutch Central Bank. Or, vice-versa, as the case may be:
Item: THE HAGUE, 11/02/11 - The Dutch central bank (DNB) is demanding that a pension fund wind down its investments in gold substantially. The pension fund for Glassmakers has put 13 percent of its assets in gold, and DNB says it has to cut this to below 3 percent. The supervisory body has given it a so-called 'directive' to do so following the fund's earlier refusal to wind down the investment in gold. The directive has emerged from a ruling by a district court, which this week found against an appeal that the fund made against the measure. The gold must now be sold within two months.DNB does not want to say that it sees gold as the next financial bubble. It does however say that the fund does not comply with the 'prudent person' rule, to which funds must adhere in the interests of their participants, with its concentration of investments in gold. Pension funds on average invest 2.7 percent in commodities.”
Silver opened with a 4-cent drop, quoted at the $30.17 spot bid level. It later sank by about 15 cents to draw closer to the round-figure mark. Meanwhile, platinum and palladium both opened with marginal advances (the former up $5 at $1,837 and the latter up $3 at $823.00) but later also gave up the trend and fell into the red column. US consumer sentiment rose to 75.1 this month, according to a University of Michigan poll. The statistic lifted US Treasuries and the US dollar as well.
…But, Wait! There’s More!
Just as this was written (9:10 AM EST) a news flash that Mr. Mubarak has “left Cairo” came across the wires. Evidently, the man was less than comforted by the manifest readiness of the throngs to storm the Palace. If in fact, this is so, then the EAF (Egyptian Armed Forces) are now in control of the country. That, in turn, might mean that Mr. Mubarak will take his $70 billion booty and hang out at his resort home on the Red Sea – just as this writer envisaged nine days ago, when talking to Marketwatch about the issue.
On the other hand, the potentially better news is that Messrs. Beck and/or Limbaugh can now give up their sad, televised and/or aired attempts at explaining the Egyptian situation and the world at large, and at making total fools of themselves in the process. Perhaps their Hollywood agents could suggest a new career, pitching the Pocket Fisherman or the Chop-O-Matic awaits them. Complete with the “But Wait!There’s More!” string of pregnant pauses.
Slice and dice until Monday.
Have a nice weekend.
Jon Nadler is a Senior Analyst at Kitco metals Inc. North America