The next bubble - Chinese Property & Construction Debt ?

If you haven't heard of it, try to get your hands on Project X. It is a movie about teenagers plotting to throw a house party while the parents are away. And what they actually pull off is beyond huge ... it is a party of epic proportions. The kind you wish you had, that turns you into an instant local hero in the eyes of your fellow party monsters for years to come. 

But so too is the fall out and hangovers afterwards - epic. Warning - if you have kids, you might decide to preemptively lock them up for good after seeing this. 

It seems like the party might soon be over for Chinese property developers too.   Available information seems to point out that until recently Chinese construction was like a Project X type house-party of epic proportions. Everybody has had a ball of a time, building ghosts cities and constructing new developments all over the place like there is no tomorrow. 

Source: http://www.ibtimes.co.uk/china-ghost-town-city-441932

Read more about it:

• here and watch the video clip
• here
• and here- and watch the video clip
• and here

But as with all good things in life, it seems like that part of the house party where everybody were having a blast, might be over. The party music is not pumping that loud anymore, the bottomless beer is starting to run out, the pretty people don't look that pretty anymore, and head aches are setting in. 

The first cracks in the wall started appearing. In the last 2 or so weeks the first debt defaults on Corporate Bonds started happening - sit tight and read the Bloomberg article here

It is interesting to note that during the previous (East) Asian collapse (which coincidentally also had an exceedingly optimistic construction growth spurt in places like Thailand), the first rumbles of collapse also started with default on bonds issued by construction companies - read more about that here. 

Read these two articles by Zerohedge for further information:

• Article 1 - Zerohedge
• Article 2 - Zerohedge

Obviously one cannot keep on kicking the can down the road and borrow money like there is no tomorrow. At some stage somebody has to pay the Pied Piper. 

And undoubtedly, other people would have made brave decisions on where to invest your money.  At this stage it is anybody's guess how much (international?) investment might be tied up in these bonds - and what exactly will be extent of contagion this time? How will it impact the economy? What about global markets?

But what is clear, is that barring a small miracle, the epic house-party just might be over.

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How to identify a bubble - as featured on Slideshare

How to spot a bubble 

My 2014 Bubble Spotting Omnibus has been featured on Slideshare !

Will this be you during the next market crash ?  Wait, what market crash, when ? Where?

Judging by current market conditions, we might be in for an interesting ride....

 If you have been following my blog, you may have noticed that I have been doing a bit of reading up on market bubbles  - how do they form, which conditions are present, what happens in the process of building up, and what happens after the bubble bursts.

In the process of doing this research I discovered some fascinating information on the topic. I decided to put all the info in presentation format - this is so anybody who may be interested in this topic, can have a look. 

The Bubblespotting 2014 Omnibus presentation starts with one of the earlier recorded (and completely man-made bubbles) which was the Tulip Bubble in the Netherlands. It furthermore then covers (in a easy readable and quick summary format) a number of major economic bubbles in different markets around the world which have taken place since. These examples cover a diverse range of bubbles up to and including the Subprime crisis, which was the most recent very big bubble that popped. 

Also incorporated are some present-day pop culture examples, which, even though not strictly classifiable as a typical financial bubble (by a long shot), still interestingly enough display some of the same attributes.

The presentation furthermore covers some of the key characteristics and highlights commonalities between these various investment bubbles (apart from some of the more spectacular market meltdowns) - in the process identifying a number of conditions / characteristics which appear to be present in the build-up and blow down phases. 

In order to keep the theory interesting, it is explained with the use of memes and a bit of humour. 

Bubble Spotting Omnibus 2014 

Read it and see if you can recognize anything familiar happening in your neck of the woods?

Hope you like it - comments welcome.

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