An opinion on China

[hardnox604008]

in this case backed up with money, even if it is OPM (other people's money). Dunno, but would be a game changer in the ags.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8166440/Hedge-fund-manager-Mark-Hart...

[Palouser]

Whether China has a bubble that is on the verge of bursting is something I don't know. But any affect on China's buying of ag products would be minimal to none. China is not managed on a free market basis and food policy is at the top of the list. As an exporter with a huge cash surplus any 'crash' would keep China even more firmly in the role of low cost labor competitor. And since they are accumulating technology at an astonishing rate I would doubt that any set back would last for long.

However, if the attitude being displayed in the article is representative of the man's actual outlook I would be the last person to throw in with him. Setting out to prove that a growing, centrally managed economy is bound to fail could be costly.

[Mark, ncIA]

Thanks Nox, I think a bubble bursting in any of the major economies would find the world having to face up to all the debt problems for good.  And deleveraging on scale could be pretty tough on everything, esp. commods.  The PIIGS are but a symptom, not sure if we know if the disease is accute or chronic.

[hardnox604008]

http://www.zerohedge.com/article/why-chinas-leading-indicators-are-big-flashing-warning-light-albert...

"Once again, China?'s leading indicator is pointing towards a very significant slowdown in economic growth ahead. The last time the Chinese OECD leading indicator was this weak, commodity prices had just reached their euphoric mid-2008 peak, having spent the first half of the year resolutely ignoring the clear signals that the economy was about to slow sharply. Commodity and EM bulls ignore the weak Chinese leading indicator at their peril."

[hardnox604008]

Hi P,

Good point, but I think we really just don't know the internal conditions of China and grain. Have inflationary conditions led to more peasant hoarding?

If 100 million peasant families hold an extra 100 bushels of grain that is 10 bb which is a whole bunch (merely an example of order of magnitude, not a prediction).

Again, dunno, but I do think that China has a very hard landing sometime. Like other bubbles that we've seen on our watch it can certainly go on longer than you think possible.

Also true that grain might be less affected than metals, energies, cement and such. However there comes the curse of the indexers- we get liquidation in the broad sector and grains will suffer even if the relative fundamentals aren't as bad.

As far as farm business goes, $3 corn and $4 wheat for a couple seasons would be a big deal given current cost of production.

Best, h

[Palouser]

I think the question boils down to - can China let things get out of control? Maybe, but I think it's unlikely. China's economy is not just regulated, the government can change any rule or operating requirement over night - no question asked, and no appeal by business. They also have the rest of the globe's previous actions as lessons from the dark side of unregulated and fraudulent financial markets.

An interesting media discussion last night pointed out that the vast number of smokey two cycle scooters in China disappeared overnight in China for air quality reasons and a declaration they were suddenly illegal. They now produce millions of electric scooters, and are expected to produce 40 million electric cars annually within the next decade.

I think the point is that it is possible that China is not as subject to free market forces because it is not ultimately a free market, since the government can step in any time, anywhere. Given the progress and experience so far I would not bet against them on a problem they have had to be watching all along.

I see an article today they are auctioning off 2008 soy stocks to processors who must crush at least 500 tns a day to qualify to participate - and cannot resell the stocks.

[Artifice]

Fwiw There are always pro, con opinions on China. An there are lots of OPM funds betting both ways. One more is one more.

Fortunes have been made long China going back  yrs, Hong Kong going back 60 years. Is China a bubble about to bust? Don’t know and no one does.