Krugman heralds start of next depression

[stockstradr]

Have you noticed that Shanghai index is creeping up recently?

You are right about that, and I admit it isn’t a small move, apparently up 11% since only July 5th

I guess my answer is that economic fundamentals will drive China’s stock markets, not the reverse.

Here is a good example of the kind of analysis of the economic fundamentals I find compelling regards imminent economic crash in China:

http://www.youtube.com/watch?v=99HNFCn5RP8

http://online.wsj.com/article/SB10001424052748704229004575370591476816352.html

If that analysis is accurate, and those predictions come to pass, then China’s stock market must fall. Keep in mind the 2005 low was 1,000. The 2008 low was 1750. Taking a guess, I figure this economic crash in China will take the SSE Composite Index well below the 2008 low.

[carlsbadworker]

[quote=stockstradr]I guess my answer is that economic fundamentals will drive China’s stock markets, not the reverse.[/quote]

I have a different theory. When I look at China’s economy, the biggest issue that I have with it is its low capital efficiency:
http://www.imf.org/external/pubs/ft/wp/2007/wp0709.pdf
To make things worse, the stimulus plan China adopted after Lehman bankruptcy favors state-owned firm which have lower capital efficiency. As a result, China just needs an enormous amount of new investments to keep its engine running.
Therefore, I believe any sign of capital fleeing the country is going to predict a real crash. But Yuan has apparently stopped its appreciation after recent small move. The stock market index is appreciating. And I don’t have good enough data to tell what is happening to its property market. The Chinese banks are sitting on an enormous amount of non-performing loan, so that could drag the future investments. But so far, I still don’t have enough data to know that the investments are declining (or stop growing) in China.

So I will not make doomsday forecast as the wsj writer did…yet.

[carlsbadworker]

[quote=stockstradr]I guess my answer is that economic fundamentals will drive China’s stock markets, not the reverse.[/quote]

I have a different theory. When I look at China’s economy, the biggest issue that I have with it is its low capital efficiency:
http://www.imf.org/external/pubs/ft/wp/2007/wp0709.pdf
To make things worse, the stimulus plan China adopted after Lehman bankruptcy favors state-owned firm which have lower capital efficiency. As a result, China just needs an enormous amount of new investments to keep its engine running.
Therefore, I believe any sign of capital fleeing the country is going to predict a real crash. But Yuan has apparently stopped its appreciation after recent small move. The stock market index is appreciating. And I don’t have good enough data to tell what is happening to its property market. The Chinese banks are sitting on an enormous amount of non-performing loan, so that could drag the future investments. But so far, I still don’t have enough data to know that the investments are declining (or stop growing) in China.

So I will not make doomsday forecast as the wsj writer did…yet.

[carlsbadworker]

[quote=stockstradr]I guess my answer is that economic fundamentals will drive China’s stock markets, not the reverse.[/quote]

I have a different theory. When I look at China’s economy, the biggest issue that I have with it is its low capital efficiency:
http://www.imf.org/external/pubs/ft/wp/2007/wp0709.pdf
To make things worse, the stimulus plan China adopted after Lehman bankruptcy favors state-owned firm which have lower capital efficiency. As a result, China just needs an enormous amount of new investments to keep its engine running.
Therefore, I believe any sign of capital fleeing the country is going to predict a real crash. But Yuan has apparently stopped its appreciation after recent small move. The stock market index is appreciating. And I don’t have good enough data to tell what is happening to its property market. The Chinese banks are sitting on an enormous amount of non-performing loan, so that could drag the future investments. But so far, I still don’t have enough data to know that the investments are declining (or stop growing) in China.

So I will not make doomsday forecast as the wsj writer did…yet.

[carlsbadworker]

[quote=stockstradr]I guess my answer is that economic fundamentals will drive China’s stock markets, not the reverse.[/quote]

I have a different theory. When I look at China’s economy, the biggest issue that I have with it is its low capital efficiency:
http://www.imf.org/external/pubs/ft/wp/2007/wp0709.pdf
To make things worse, the stimulus plan China adopted after Lehman bankruptcy favors state-owned firm which have lower capital efficiency. As a result, China just needs an enormous amount of new investments to keep its engine running.
Therefore, I believe any sign of capital fleeing the country is going to predict a real crash. But Yuan has apparently stopped its appreciation after recent small move. The stock market index is appreciating. And I don’t have good enough data to tell what is happening to its property market. The Chinese banks are sitting on an enormous amount of non-performing loan, so that could drag the future investments. But so far, I still don’t have enough data to know that the investments are declining (or stop growing) in China.

So I will not make doomsday forecast as the wsj writer did…yet.

[carlsbadworker]

[quote=stockstradr]I guess my answer is that economic fundamentals will drive China’s stock markets, not the reverse.[/quote]

I have a different theory. When I look at China’s economy, the biggest issue that I have with it is its low capital efficiency:
http://www.imf.org/external/pubs/ft/wp/2007/wp0709.pdf
To make things worse, the stimulus plan China adopted after Lehman bankruptcy favors state-owned firm which have lower capital efficiency. As a result, China just needs an enormous amount of new investments to keep its engine running.
Therefore, I believe any sign of capital fleeing the country is going to predict a real crash. But Yuan has apparently stopped its appreciation after recent small move. The stock market index is appreciating. And I don’t have good enough data to tell what is happening to its property market. The Chinese banks are sitting on an enormous amount of non-performing loan, so that could drag the future investments. But so far, I still don’t have enough data to know that the investments are declining (or stop growing) in China.

So I will not make doomsday forecast as the wsj writer did…yet.

[Aecetia]

stockstradr,

You are welcome. I think what happens to precious metals will be a pre-echo of what is going to happen to the economy. Besides watching China, see what happens to the Euro. Whatever will happen is going to be a sudden. As far as I am concerned the market is about as safe a Vegas. No one satisfactorily explained the large drop in may by someone who hit b instead of m. Still not buying it. Did you catch the one where “Mystery trader buys all Europe’s cocoa?” I would expect similar things to happen in other food commodities due to weather related food shortages. Some people think silver is underpriced because there is a shortage and it has many industrial applications. Good luck to you.

Here is the cocoa link-
http://www.telegraph.co.uk/finance/markets/7895242/Mystery-trader-buys-all-Europes-cocoa.html

Here is another link that might interest you:

GCQ10 – August Gold (Last:1163.00)

[Aecetia]

stockstradr,

You are welcome. I think what happens to precious metals will be a pre-echo of what is going to happen to the economy. Besides watching China, see what happens to the Euro. Whatever will happen is going to be a sudden. As far as I am concerned the market is about as safe a Vegas. No one satisfactorily explained the large drop in may by someone who hit b instead of m. Still not buying it. Did you catch the one where “Mystery trader buys all Europe’s cocoa?” I would expect similar things to happen in other food commodities due to weather related food shortages. Some people think silver is underpriced because there is a shortage and it has many industrial applications. Good luck to you.

Here is the cocoa link-
http://www.telegraph.co.uk/finance/markets/7895242/Mystery-trader-buys-all-Europes-cocoa.html

Here is another link that might interest you:

GCQ10 – August Gold (Last:1163.00)

[Aecetia]

stockstradr,

You are welcome. I think what happens to precious metals will be a pre-echo of what is going to happen to the economy. Besides watching China, see what happens to the Euro. Whatever will happen is going to be a sudden. As far as I am concerned the market is about as safe a Vegas. No one satisfactorily explained the large drop in may by someone who hit b instead of m. Still not buying it. Did you catch the one where “Mystery trader buys all Europe’s cocoa?” I would expect similar things to happen in other food commodities due to weather related food shortages. Some people think silver is underpriced because there is a shortage and it has many industrial applications. Good luck to you.

Here is the cocoa link-
http://www.telegraph.co.uk/finance/markets/7895242/Mystery-trader-buys-all-Europes-cocoa.html

Here is another link that might interest you:

GCQ10 – August Gold (Last:1163.00)

[Aecetia]

stockstradr,

You are welcome. I think what happens to precious metals will be a pre-echo of what is going to happen to the economy. Besides watching China, see what happens to the Euro. Whatever will happen is going to be a sudden. As far as I am concerned the market is about as safe a Vegas. No one satisfactorily explained the large drop in may by someone who hit b instead of m. Still not buying it. Did you catch the one where “Mystery trader buys all Europe’s cocoa?” I would expect similar things to happen in other food commodities due to weather related food shortages. Some people think silver is underpriced because there is a shortage and it has many industrial applications. Good luck to you.

Here is the cocoa link-
http://www.telegraph.co.uk/finance/markets/7895242/Mystery-trader-buys-all-Europes-cocoa.html

Here is another link that might interest you:

GCQ10 – August Gold (Last:1163.00)

[Aecetia]

stockstradr,

You are welcome. I think what happens to precious metals will be a pre-echo of what is going to happen to the economy. Besides watching China, see what happens to the Euro. Whatever will happen is going to be a sudden. As far as I am concerned the market is about as safe a Vegas. No one satisfactorily explained the large drop in may by someone who hit b instead of m. Still not buying it. Did you catch the one where “Mystery trader buys all Europe’s cocoa?” I would expect similar things to happen in other food commodities due to weather related food shortages. Some people think silver is underpriced because there is a shortage and it has many industrial applications. Good luck to you.

Here is the cocoa link-
http://www.telegraph.co.uk/finance/markets/7895242/Mystery-trader-buys-all-Europes-cocoa.html

Here is another link that might interest you:

GCQ10 – August Gold (Last:1163.00)

[ucodegen]

[quote carlsbadworker]
I have a different theory. When I look at China’s economy, the biggest issue that I have with it is its low capital efficiency:
[/quote]
Thanks for the link. Interesting paper. I did notice that they don’t seem to account for the time lag of Capital Expenditure to revenue generation from Capital Expenditure. Under growth conditions greater than about 10%/yr, this can make it look like you are not making efficient use of capital. It take time for plant and equipment purchases to start making a return on investment.

I was hoping that they were going to cover more on “revenue productivity of labor”, but they were unable to segregate high tech from manual. I think this is where some divergence will be seen.

[ucodegen]

[quote carlsbadworker]
I have a different theory. When I look at China’s economy, the biggest issue that I have with it is its low capital efficiency:
[/quote]
Thanks for the link. Interesting paper. I did notice that they don’t seem to account for the time lag of Capital Expenditure to revenue generation from Capital Expenditure. Under growth conditions greater than about 10%/yr, this can make it look like you are not making efficient use of capital. It take time for plant and equipment purchases to start making a return on investment.

I was hoping that they were going to cover more on “revenue productivity of labor”, but they were unable to segregate high tech from manual. I think this is where some divergence will be seen.

[ucodegen]

[quote carlsbadworker]
I have a different theory. When I look at China’s economy, the biggest issue that I have with it is its low capital efficiency:
[/quote]
Thanks for the link. Interesting paper. I did notice that they don’t seem to account for the time lag of Capital Expenditure to revenue generation from Capital Expenditure. Under growth conditions greater than about 10%/yr, this can make it look like you are not making efficient use of capital. It take time for plant and equipment purchases to start making a return on investment.

I was hoping that they were going to cover more on “revenue productivity of labor”, but they were unable to segregate high tech from manual. I think this is where some divergence will be seen.

[ucodegen]

[quote carlsbadworker]
I have a different theory. When I look at China’s economy, the biggest issue that I have with it is its low capital efficiency:
[/quote]
Thanks for the link. Interesting paper. I did notice that they don’t seem to account for the time lag of Capital Expenditure to revenue generation from Capital Expenditure. Under growth conditions greater than about 10%/yr, this can make it look like you are not making efficient use of capital. It take time for plant and equipment purchases to start making a return on investment.

I was hoping that they were going to cover more on “revenue productivity of labor”, but they were unable to segregate high tech from manual. I think this is where some divergence will be seen.

[Author]

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