Saturday, December 17, 2011

A Report From Hong Kong on the Developing Crisis in China

Joe Nelson, a graduate student at NYU's Leonard N. Stern School of Business, emails:
Nice work! It’s great to see EPJ, and Austrians of all stripes are now too big to ignore even by those in the most rarified of ivory towers [such as Paul Krugman]....


P.S. I was in Hong Kong, Shenzhen and Macau a little over a week ago. While I was in Hong Kong I had dinner with a gold trader at a very large bank in HK. We got to talking about China, the ghost cities, empty airports and bridges to nowhere. I asked about what his view given he was much closer to the action than I am. He told me, point blank, that while there is a real functioning economy in China, there is a tremendous amount of hot air and we’re about to find out how much. His sentiment pretty much echoed that of everyone else I spoke with and the business papers and TV stations are swimming in stories about the impending collapse.

If any of your readers are interested in moving to Hong Kong (and it is an absolutely amazing place; NYC looks like a town full of pikers in comparison), they may get a break on real estate prices as a result of the Chinese collapse. For kicks, I popped in on a few brokers and was told the mainlanders have been the primary bidders in the SARs of southern China and as a result property in Hong Kong has been bid to the moon. That’s easing and was evident even during my trip. A year from now, there could be some real bargains.
Update: Joe adds about gold in Hong Kong:

I forgot to add one thing EPJ readers might like. Physical gold in HK can be bought for as little as 0.25% over spot. I'm sure some EPJ readers have seen Simon Black's reports about how cheap gold is in HK. I'm pleased to confirm his report.


  1. Joe,

    what was the traders views on gold and the esp Chinese/Asian demand?


  2. @Anon 11:47

    We discussed a little bit about gold's long term prospects. Mainly bullish but there are likely to be some hiccups along the way. My own $0.02 is that a collapse in China may cause a sell off in gold, at least temporarily. As for demand, gold has a little more cultural relevance in a place like HK than say the US and people there are a more accustom to buying gold than Americans but it isn't as if there's a line outside the banks in HK to buy it.

  3. Absolutely agree with Joe. I would hold any physical I had and sell paper gold, silver etc. Gold along with all energy commodities will most likely collapse in 2012 to prices near or even more then the 2009 lows. My guess is gold will get close to $1000 and oil in the low $30s. The key I think right now is to be in as much US$/UST's as you can and then wait for the buying opportunity of a lifetime. The dollar will probably achieve parity with the Euro and that will send the Fed and the other CB of the world into overdrive printing money that will make QE2 look like chump change. My guess is that the Fed alone will print $3T-$6T.

    The hard part is that you are going to have to buy when things decline rapidly and you are scared to death of losing valuable dollars (sounds sick to say valuable) because when the fed announces QE3x10 it will be too late.

    Do not for one minute buy into this idea that the US will decouple as current economic numbers might suggest. The US corps that have been having record profits have made a large portion of those profits in markets outside the US which are all starting to slow. The market might still rally one or two more times, but it will start declining as earnings season kicks and and the corps lower their forecasts. If you are afraid of missing a possible rally, then buy near money long dated calls to protect your downside.

    Anyhow, this is what I am preparing for and doing and of course what I am doing may not be appropriate for others so you have to make up a plan that works for you. The key, however is that you have a plan. Good luck and I sure hope I am wrong.