Baltic Dry Index. 1247 +14 Brent Crude 84.09
Spot Gold 1892 US 2 Year Yield 4.94 -0.04
“Investors expressed their displeasure by questioning the rationale behind the firm's utilisation of the "pooling of funds" model for product sales. This approach involves consolidating funds from different investment products into a single entity, then using proceeds from newly sold products to meet obligations from older ones.”
Zhongrong International Trust Co. Ltd. Isn’t that a Ponzi scheme?
Today and all weekend, it’s all about China. Has China hit its Credit Swiss moment?
More on that in tomorrow’s Special LIR Update.
For now though, rising fear and trepidation in the way overpriced stock casinos, priced for a perfection that was just another bubble.
The sky may not actually yet be falling, but if
much of China’s economy is nothing more than a giant Ponzi Scheme, bad times
for most lie directly ahead.
Asia markets fall as investors assess Japan
inflation; China’s Evergrande bankruptcy filing
UPDATED THU, AUG 17 2023 9:49 PM
EDT
Asia-Pacific markets fell on Friday as investors
assessed Japan’s July inflation data and fresh blows to China’s real estate
sector.
Japan’s core
inflation rate fell to 3.1%, down from 3.3% in June. Headline inflation
remained at 3.3%.
Meanwhile,
embattled Chinese real estate giant Evergrande has filed for bankruptcy
protection in a U.S bankruptcy court.
The company
sought protection under Chapter 15 of the U.S. bankruptcy code, which shields
non-U.S. companies that are undergoing restructuring from creditors.
Hong Kong’s Hang Seng index slid
0.35%, while the mainland CSI 300 index was trading close to the flatline.
Japan’s Nikkei 225 slipped
0.42% and the Topix also fell by 0.57% after the inflation reading was
released.
In Australia, the S&P/ASX 200 inched
up marginally, while South Korea’s Kospi was
0.43% lower and the Kosdaq lost 1.28%.
On Thursday in the U.S., all three major indexes lost
ground as investors continued to grapple with minutes from the
U.S. Federal Reserve that showed it remains concerned about inflation, and more
rate hikes may be needed.
The Dow Jones Industrial Average dropped
0.84%, and closed for the first time under its 50-day moving average since June
1, a potential warning sign of a downtrend.
Meanwhile, the S&P 500 fell
0.77%, and the Nasdaq
Composite declined 1.17%.
China’s property giant Evergrande files for
bankruptcy protection in Manhattan court
China’s heavily indebted property developer
Evergrande group on Thursday filed for Chapter 15 bankruptcy protection in a
U.S. court.
In a filing to the Manhattan
bankruptcy court, the firm sought recognition of restructuring talks under way
in Hong Kong, the Cayman Islands and the British Virgin Islands.
CNBC has reached out to Evergrande for comment but did not hear back.
The world’s most indebted property
developer defaulted
in 2021 and announced an offshore debt restructuring program in March. Trading of Evergrande shares have
been suspended since March 2022.
The Chapter 15 bankruptcy protection allows a
U.S. bankruptcy court to intervene in cross-border insolvency case involving
foreign companies that are undergoing restructuring from creditors. It aims to
protect the debtors’ assets and facilitate the rescue of businesses that are in
financial trouble.
Tianji Holdings, an
affiliate of Evergrande, and its subsidiary Scenery Journey, also filed for
Chapter 15 protection in a Manhattan bankruptcy court, according to the filing.
Property sector fallout
Evergrande’s filing
comes amid contagion fears that China’s
property sector troubles could spill over to other parts of the
economy, which has already
seen faltering
growth.
Most recently, Country Garden, which used to be
one of China’s largest developers, struggled to make coupon
payments on U.S. dollar-denominated bonds and issued a profit warning.
The firm has also suspended
trading in at least 10 of its mainland-China traded yuan bonds,
according to Reuters.
China’s massive real estate sector has long been a vital engine of growth for the world’s
second-largest economy, and accounts for as much as 30% of the country’s gross
domestic product.
---- In July, Evergrande posted
a combined loss of $81 billion over the past two years, after
struggling to finish projects and repay suppliers and lenders.
Net losses for 2021 and 2022 were
476 billion yuan ($66.36 billion) and 105.9 billion yuan ($14.76 billion),
respectively, as a result of property write-downs, return of lands, losses on
financial assets and financing costs, the company said.
The bankruptcy filing was signed by
Jimmy Fong, who listed himself as a “foreign representative” of China
Evergrande Group. A “scheme creditors” meting is set for Wednesday at the Hong
Kong office of Sidley Austin, the U.S. based law firm representing Evergrande,
the petition added.
China
property developer Evergrande files for bankruptcy protection in US (cnbc.com)
China’s economic model is ‘washed up on the
beach,’ says veteran investor David Roche
China’s economic model is “washed up on the beach”
and “not going to take off again,” which will have a big impact on global
markets, says veteran investor David Roche.
Despite a remarkable rally in stock
markets so far this year, concerns have been growing over the potential ripple
effect of a prolonged slowdown in China.
Beijing has acknowledged its
immediate economic headwinds and signaled
more fiscal policy support, while the People’s
Bank of China unexpectedly cut interest rates on Tuesday. China
has experienced meteoric growth that outpaced developed countries over the past
two decades, overtaking Japan as the world’s second-largest economy. However,
many economists now see a longer structural downward trend amid diminishing
contributions from property and manufacturing — the traditional pillars of
China’s rapid economic expansion.
The ruling Chinese Communist Party
has set a growth target of 5% for 2023 — lower than usual objectives and
notably modest for a country that the
World Bank says has averaged 9% annual GDP growth since opening
up its economy in 1978. Some economists now think Beijing may even fall short
of that target.
Roche, president and global
strategist at Independent Strategy, told CNBC’s “Squawk Box Europe” on
Thursday that global stock markets were failing to price in a long-term decline
in the role that manufacturing plays in powering emerging market economies.
“We all buy goods with more
services in them than metal for example, so even the output of manufacturing is
full of services,” said Roche, who correctly predicted the development of the
Asian crisis in 1997 and the 2008 global financial crisis.
He added that economies that
historically exported manufactured goods will struggle to generate any
meaningful growth in that sector, which will cause “big disappointments in
populations, more geopolitical problems and more riots in the streets.”
“The Chinese model is clearly
washed up on the beach with a huge number of legacy holes in it, and it’s not
going to take off again,” Roche said. The Chinese Embassy in London did not
immediately respond to CNBC’s request for comment.
“They really don’t have the approach to surgically
get rid of bad debts and bad assets, and at the same time, they’re not going to
be able to rely on their traditional measures of growth. That’s the big
problem.”
China on Tuesday suspended
releases of data on youth unemployment, which recently soared to
record highs, while the July economic data showed a broad slowdown exacerbated
by the country’s property
market slump.
Roche suggested that the changing
demographics in China meant the country no longer has enough young people to
justify a complete renewal of its real estate cycle — a market often estimated
to power between 20% and 30% of the country’s gross domestic product.
More
David
Roche: China's economic model is 'washed up on the beach' (cnbc.com)
Dalio says China is
overdue in reducing its debt
August 17,
20239:23 PM GMT+1
Aug 17 (Reuters) - Legendary investor
Ray Dalio, a big enthusiast and investor in China, said on Thursday the world's
second largest economy is overdue in conducting a "big debt
restructuring."
"As for the debt and the economy,
there is an obvious need for a big debt restructuring of the sort that Zhu
Rongji engineered in the late 1990s, just much bigger," Dalio wrote in a
LinkedIn post, referring to the former Chinese premier who reformed lumbering
state-owned enterprises and laid off millions. "China is overdue in doing
it."
Dalio said deleveraging is never an
easy task, but in the case of China it can be more manageable because most of
its debt is in domestic currency and is held by its citizens.
"It needs to follow this
beautiful deleveraging process now because the debt-burdened balance sheets and
burdensome debt service payments are freezing the economy, especially at the
provincial level and most especially in some of the poorest provinces,"
Dalio said.
More
Dalio
says China is overdue in reducing its debt | Reuters
“Fiat-money! Let the State 'create' money, and make the poor
rich, and free them from the bonds of the capitalists! How foolish to forego
the opportunity of making everybody rich, and consequently happy, that the
State's right to create money gives it! How wrong to forego it simply because
this would run counter to the interests of the rich! How wicked of the
economists to assert that it is not within the power of the State to create
wealth by means of the printing press!- You statesmen want to build railways,
and complain of the low state of the exchequer? Well, then, do not beg loans
from the capitalists and anxiously calculate whether your railways will bring
in enough to enable you to pay interest and amortization on your debt. Create
money, and help yourselves.”
Ludwig von Mises, The
Theory of Money and Credit
Global Inflation/Stagflation/Recession
Watch.
Given
our Magic Money Tree central banksters and our spendthrift politicians,
inflation now needs an entire section of its own.
China’s
property crisis: Zhongrong trust misses payments
August 17, 2023
Concerns over
the impact of China's property market turmoil intensify as Zhongrong
International Trust, a major wealth manager in China, confirms a string of
missed payments on financial products sold to investors across the nation.
These
apprehensions prompted a 0.8% dip in the Shanghai market, a 0.7% decline in the
CSI 300 index, and a 1.3% drop in the Hang Seng Index, marking another
significant fall this week.
Zhongrong
International Trust, formerly known as Harbin International Trust, established
in 1987, is facing mounting reports of missed payments to investors of various
types and sizes. The company has considerable exposure to the real estate
sector.
Media sources
indicate that a meeting held on Monday in Beijing with investors unveiled the
confirmation of these missed payments, further fueling concerns.
The trust firm
has been unable to reimburse clients over the past few days following reports
that its second-largest shareholder, Zhongzhi Enterprise Group, depleted its
cash reserves earlier this month, according to the Asia Times.
Bloomberg
reported that Wang Qiang, the company's board secretary and legal adviser,
disclosed during the meeting on Monday that Zhongrong International Trust is
grappling with short-term liquidity challenges. Wang conveyed to investors that
the firm currently has no immediate plans to fulfill repayment obligations for
numerous matured products. The source declined to be named due to the sensitive
nature of the issue.
Reuter's
attempts to elicit responses from Zhongrong and the National Financial
Regulatory Administration, the banking sector's regulatory body, went
unanswered. Additionally, Wang, who serves as both board secretary and legal
adviser, remained unreachable.
Bloomberg's
report detailed Wang's announcement during the meeting that certain short-term
investment products, spanning three to twelve months, utilised funds generated
from the sale of new products to settle obligations tied to older products.
Investors
expressed their displeasure by questioning the rationale behind the firm's
utilisation of the "pooling of funds" model for product sales. This
approach involves consolidating funds from different investment products into a
single entity, then using proceeds from newly sold products to meet obligations
from older ones. In 2018, China introduced comprehensive asset management
regulations to curb such practices.
According to
media accounts, Wang assured investors that the firm's trust products are
registered with regulators and adhere to relevant regulations.
Wang also
conveyed to investors the firm's commitment to restore normal operations and
develop a plan to fulfill obligations, either through asset disposition or
restructuring, as indicated in the reports.
Zhongrong's engagement with investors
comes on the heels of two publicly listed companies announcing over the weekend
that they hadn't received payment for maturing investment products from the
trust firm, which has historically had substantial exposure to the real estate
market.
The missed payments by Zhongrong have
exacerbated concerns surrounding the outsized exposure of China's $3 trillion
shadow banking sector. This issue surfaces at a time when the economy's
vulnerability is accentuated by a deepening property downturn.
China's property crisis: Zhongrong trust misses payments - ShareCafe
Will the
rest of the world feel China’s deflation pain?
Falling
prices will lower cost of imports but are unlikely to have a dramatic impact
elsewhere
August
17, 2023
Beijing’s economic woes worsened last week after it emerged China had fallen into deflation. The news highlights how the country is struggling to live up to expectations of a strong recovery after emerging from extended Covid lockdowns.
But will falling prices have an impact beyond China’s borders, in places where the bigger risk is still that an extended period of high inflation will endure?
For
now, economists say there is little reason for concern, as:
Chinese deflation is likely to prove temporary
Deflation is primarily a concern when it is pervasive and caused by companies desperate to sell to consumers who are unwilling or unable to buy because they have fallen on hard times.
This describes neither China’s economy nor its price movements.
The economic recovery following the reopening has disappointed — the property sector remains a serious concern — but output is still growing and an expansion of close to 5 per cent this year is still on the cards.
“China’s consumption recovery remains soft and uneven, but this a far cry from Japan-style deflation,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics, referring to the country’s decades-long experience with falling prices.
While Chinese consumer prices fell 0.3 per cent in the year to July, a small fall in costs also occurred in 2021. Now as then, the deflation appears temporary — more the result of base effects than any deep problems.
More
Will the rest of the world feel China’s deflation pain? | Financial Times
Covid-19 Corner
This section will continue until it becomes unneeded.
New Covid variant branded the 'real deal' could already
be in BRITAIN, experts claim amid calls for return of face masks to slow spread
of virus
The
strain has yet to be officially named but has already been dubbed BA.6
|
A new Covid variant labelled the 'real deal' may already
be in the UK, scientists claimed today.
The Omicron spin-off — dubbed BA.6 but yet to be
officially named — has sparked concerns of a fresh wave because of its
catalogue of mutations.
Only two countries — Denmark and Israel — have
spotted it so far.
But experts told MailOnline that, if the strain is proven
to be as troublesome as first feared, it could spread 'very soon'.
Professor Paul Hunter, a world-renowned infectious
disease specialist based at the University of East Anglia, said it 'probably'
is already in the UK or US if the strain is more contagious than existing variants. He
added: 'If it isn't now, then it probably very soon will be.'
Some scientists
have already called for the return of face masks because of the spin-off
strain.
Others, however,
have warned it is far too early to panic and stressed that lockdown-era
restrictions won't be needed.
Health chiefs have
yet to make any formal announcement on the variant, which was first detected
towards the end of July.
But one
epidemiologist at the UK Health Security Agency, tasked with tracking viral
threats such as Covid, said it could be 'Pi', the letter which follows Omicron
in the Greek alphabet — the system officials use to name new strains.
Alarm bells were
only rung earlier this week, after a prominent online virus-tracker spotted two
cases crop up in Denmark.
The discovery came
just a day after the same lineage was detected in Israel.
Virologists know
all three are the same virus because of the collection of mutations they
carry.
A process called
'sequencing' allows scientists to find the exact genetic make-up of every virus
sample.
Early tests show
BA.6 carries more than 30 mutations in its spike protein, the part of the virus
that latches onto human cells and causes an infection.
More
Technology
Update.
With events happening fast in the
development of solar power and graphene, among other things, I’ve added this
section. Updates as they get reported.
A lampshade that purifies air. Shame
about it using platinum, although copper seems to work as well. The killer is
likely to be generating carbon dioxide when everyone else is desperately trying
to get rid of it.
Lampshade coating designed to purify indoor air
Ben Coxworth August 16, 2023
Most people already know that house plants such
as pothos help neutralize indoor air pollutants. In the near
future, however, a special coating applied to lampshades could serve much the
same purpose.
Volatile organic compounds (VOCs) are given off
by a variety of household materials, such as carpeting, paint and
particleboard. And while they're typically only present in small amounts in
most people's homes, over time they can eventually cause eye, nose and throat
irritation, headaches, and even damage to the liver, kidneys and central
nervous system.
There are air
filters that capture VOCs, but they utilize filtration media that periodically
has to be replaced. Homeowners can also use devices that incorporate
thermocatalysts or photocatalysts, which are compounds that break down VOCs
when heated or exposed to light, respectively. Most of these gadgets, however,
require a separate heater or source of ultraviolet light.
Led by Dr.
Hyoung-il Kim, scientists at South Korea's Yonsei University have now developed
a thermocatalyst that can be applied to the inside surface of a lampshade.
Composed of titanium dioxide and "a small amount" of platinum, this material
is triggered to break down VOCs when warmed by the lamp's existing incandescent
or halogen bulb.
In lab tests, the
coating was applied to the inside of an aluminum lampshade, then heated to
about 250 ºF (121 ºC) by a 100-watt halogen bulb located inside that shade.
This setup was placed in a sealed chamber containing air and acetaldehyde gas,
the latter of which is a common VOC.
It was found that
the coating quickly converted the acetaldehyde gas into acetic acid, then into
formic acid, and finally into carbon dioxide and water. Similar results were
obtained using an incandescent bulb, and when trying to neutralize
formaldehyde. The acids are claimed to be quite mild, and the small amount of
carbon dioxide produced is reportedly harmless.
Of course, many
household lamps now utilize LED bulbs, which produce very little heat. With
that fact in mind, the scientists are looking into compounds that would convert
some of an LED's visible light output into heat, along with photocatalysts that
would be triggered by near-infrared light emitted by LEDs.
The researchers are also
working on a less expensive alternative to platinum, and have already had good
results using iron and copper – the latter metal may have the added benefit of
killing airborne microorganisms, as copper is known for its antimicrobial
properties.
"Our ultimate goal is to
develop a hybrid catalyst that can utilize the full spectrum produced by light
sources, including UV and visible light, as well as waste heat," said Kim.
Source: American Chemical Society via EurekAlert
Lampshade coating designed to purify indoor air
(newatlas.com)
Another weekend and in tomorrow’s LIR
why I think China’s property implosion is just starting, is unfixable and will
in turn cause a recession in China that will inevitably spill into the USA, UK
and already in the faltering EU. Plus delightful
Lute music from the very underrated, largely forgotten, Johann F. Fasch.
Have a great weekend everyone.
"There is no means of avoiding the final collapse of a boom
brought about by credit expansion. The alternative is only whether the crisis
should come sooner as the result of voluntary abandonment of further credit
expansion, or later as a final and total catastrophe of the currency system
involved."
Ludwig von Mises.
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