Monday, April 9, 2012

Wow, China Housing Bubble Is "Over", Says Jim Rogers

"There has been a bubble in the Chinese property market which is now over," Jim Rogers tells the China Daily.. "The Chinese government has been trying to burst the bubble. I think the government is doing the right thing to bring down the price of property. If you do not pop bubbles, lots of people get badly hurt. The bigger the bubble gets, the worse it is for everyone.

"It's always right to follow what the government does, so look at the Five-Year Plan (2011-15) to see where the government's sympathy lies," said Rogers.

I couldn't disagree with Rogers more, the massive money pumping by the People's Bank of China in recent years has created a massive distortion in the capital structure of the economy. These distortions are far from liquidated and the PBOC is too scared of price inflation to pump enough to hold up the old structure.

As far as China's "Five-Year Plan", government central planning never works. Government five-year plans have been complete failures around the globe. I have no idea why Rogers believes China is going to be able to execute its "plan".  The country is in major flux both politically and economically, any five-year plan is a joke.


  1. I don't care what your economic beliefs are, when you have your cold hard cash riding on the line, you'll throw away values in a second if that means you get your money back out of a bad investment. I think its pretty clear that Rogers is long China.

  2. I always used to hear that the real estate bubble in China wont be as bad as here because buyers there had to put up 20%. That they never had the zero down 1% for the first year interest only payments.

    Any truth to this?

    Also, assuming that there is a severe, recession/depression in China, does anyone think it would result in state collapse/civil war, etc?

  3. Hmmmmmm...

    My reading isn't that he ENDORSES the 5 year plan, but "it's right" to look at it as an outsider to see what the bastards have in mind.

  4. If you look at the property market in Australia, there is areas with RE down 20-25% and more from a couple years ago (South East Queensland) whilst other areas in the same state prices are at all time highs with healthy 9%+ rental yields (such as Mackay and Moranbah in Central Queensland, home of coal mining boom).

    I'd assume there is similar regional discrepancies in China, as there is everywhere so I think Roger's biggest mistake is not to claim the bubble is over, but rather to aggregate national prices when real estate is and will always be locally variable.

  5. Jim Rogers is a dumbass on this one. Government trying to pop bubbles? What a stupid thing to assume. GOvernment create bubbles, why would they do that to a nation? Inflate then pop bubbles? To watch people suffer....what an idiot. I'll tell you what, this will be one huge spectacle when it does pop if that's the government's aim. They could easily deflate it if they get out of the way. Government is the problem....remove it!

  6. A follow-up to my comment. China's government is making the people poorer is all they are doing:


  8. Rogers was recently on CNBC and didn't rule out the possibility of a hard crash in the economy but said in the long run they will be better off. My reading of this is not that China's bust period of the cycle is complete, but that the current monetary policy espoused by the PBOC is a cautious one which will prevent even further inflation and more wealth destruction.

  9. Roger's mantra is the 20th Century was the American Century, the 21st Century belongs to China. He is right about America becoming one among many, but China and every other government are on a similar path in terms of corruption, central banks, statism, so hard to see how they exceed in the manner he predicts.

  10. Relevant facts about Jim Rogers:

    By his own admission, he is the world's worst market timer, so when he makes a statement, it's when the shift is clearly underway.

    Yes, he talks his book. He's heavily long China and is worried, hoping (ironically) the central planners avoid absolute catastrophe. How this squares with a supposedly Austrian approach to investing is anyone's guess, but it's relying on extreme amounts of luck, at best.

  11. Anonymous @ 01:21 PM wrote, "I don't care what your economic beliefs are, when you have your cold hard cash riding on the line, you'll throw away values in a second if that means you get your money back out of a bad investment."

    I'd say, you really don't know People all that well. I'd also say, your statement is flat out wrong.
    Maybe it applies to a lot of People, but not everyone. I'm guessing you're from the East Coast where that might be the norm? Your characterization is one of scoundrels and opportunist, but not everyone.

    Anonymous @ 03:56 PM wrote, "real estate is and will always be locally variable."

    That's not true either. I'd say there's plenty of evidence that is not true over at The Housing Bubble Blog, they've been documenting facts against what you wrote for a very long time now.

    adringuti wrote, "Government trying to pop bubbles? What a stupid thing to assume."

    Ah, geeze, you really should spend a little time over at The Daily Bell, perhaps then you would understand the why?

    EPJ is quite the linchpin to the other sites.

    - clark

  12. Hm.. did Jim Rogers say that somewhere other than the China Daily? Cause it wouldn't be the first time when a communist newspaper bends the truth in their favor.

    Although there's a chance that Jim Rogers is long China and... not sure what his motives would be, but I wouldn't rush to call him a dumbass. Even if he's wrong. Calling Jim Rogers a dumbass makes me raise a question that... who are you, adringuti? What have YOU done? Calling names is not the best way to go (unless those people are Keynesians, such as Paul Krugman).

  13. Anonymous @ 06:13 PM wrote, "China and every other government are on a similar path in terms of corruption, central banks, statism, so hard to see how they exceed in the manner he predicts."

    If they crash first, they will re-build first and be ahead of the game and ahead of those who crash last, such as the unitedstate.

    First in, first out.

    Plus, as I understand things, China has an economy based on equipment and manufacturing capabilities more than they have a service based economy, that will allow them to flourish If the People there manage to get the goberment out of the way.
    Based upon things such as less red tape to start a business in China compared to the the unitedstate, and quite unlike countries such as the unitedstate which seem to think a service based economy and state tribute will be what brings success, China could get a leg up on everyone else. Jmho.

    ... Or have you noticed many trends in the unitedstate to remove barriers to entry into business and reasons to expect lower taxes and regulations allowing the People of the unitedstate to compete with the rest of the world?

    - clark

  14. yeah, both rogers and schiff are tied to the mast a bit on the china deal having sung its praises over the last decade or so...

  15. "yeah, both rogers and schiff are tied to the mast a bit on the china deal having sung its praises over the last decade or so..."

    That's actually quite a good comment in my estimation.

    I remember back around the start of the housing bust here in the U.S., Schiff was really pumping up offshore stocks/equities...what he didn't see coming then was a global money printing issue and he/his customers had some setbacks from that. He was right in decrying US money printing but he underestimated the US's strength in getting everyone one else to carry our water so to speak(via currency swaps, etc.). Plus I think he was too optimistic(as is Rogers) on the ability of China and other Asian up and comers to consume their productivity without the help of the US(and other industrialized nations). China still has lots of poor people...

    Personally I think this is still the big question. The complexities of the global market with all this rampant money printing globally are creating massive distortions on a global basis.

    I think Marc Faber(who I don't always agree with either) said it best when he said (paraphrasing) "In a money printing environment everyone is losing money but the "winners" are those that manage to lose the least."

    I think that's a fairly accurate statement when you look at legacy earnings based on mature technology in competitive environments and capital intensive business.

    I'm just focusing on my small business and making sure it's profitable via niches,while stuffing away extra money away in gold/silver because frankly I don't trust any "investment" anymore unless I have my hands directly in it.

  16. Clark makes sense to me...For what THAT''s worth.