CHINA – THE MOTHER OF ALL BLACK SWANS

Thanks to Market Folly for this excellent presentation on the investment risks in China:



Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

More Posts - Website

Follow Me:
TwitterLinkedIn

Comments

  1. Don’t underestimate the Chinese Government. They know that domestic demand needs to be the future engine for growth and that a focus on healthcare, social security is needed to open the purse strings of the local population. They may be ahead of the curve in terms of infrastructure projects but thank you China for helping to bring the world back from the brink. I did read more or less the same article some time ago only in a lot more detail provided by Pivot Capital.

  2. Why do we have so much trust in the chinese goverment? Whenever politicians do something in the west, it usually ends in disaster. I guess we looked at too much kung fu movies and believe that the chinese government is run by an assembly of kung fu masters that will overcome any challlenges!
    I don’t see how they will overcome the forces of capital gravity

    • One important assumption for all China bulls is that Chinese politicians are much more smarter than their western counterpart, they are smart, because they ignore law of supply and demand. lol.

  3. if you can imagine it, then by definition, it is not a black swan. why is the financial blog community so obsessed with calling the next black swan?

  4. Certainly possible – but when? If you do a news run, there was a not insignificant group of people calling Japan a bubble in 1980. The bubble didn’t burst for another 10 years. It’s often not hard to spot a bubble, but it’s exceedingly difficult to time it (see: tech bubble, real estate bubble). Yet another annoying aspect of the central bank / totalitarian government “managed” economies of the past 25 years.

  5. This guy has it exactly right. China may hide their problems for a while longer just like Japan did, but when they go bust it will be worse than Japan. No central controlled economy has ever worked. Just look at all of the Soviet Bloc economies from the past and Cuba and now we have Venezuela being destroyed by the good intentions of Hugo Chavez.

  6. Interesting article based on a number of facts and figures with a few assumptions thrown in there.

    I would just like to raise one small issue which seems to be overlooked in the article. From 1995 – 2005, there was a real possiblity for business people to make money with SME’s. Today SME’s are going out of business by the boatload ( manufacture, retail, small business ) and the most rewarding industries are controlled by SOE or by relatives of the Party. As most of employement comes from SMEs in any economy and the reality that there is not incentive to be an SME ( you get the cost and taxes and what not) , this source will dry up leaving the SOEs in charge. These SME owners have taken their money and speculatively invested in property or stock market or if more clever took overseas under the radar .

    Behind these SOEs it must be understood that they are not run to be profitable ( unless you call corruption etc as benefit for the few) but their primary focus is to give employment and bring social harmony. However after some time and after the West learns of the facades and cracks and the fact that the ROI is not quite what they expected ( hmm not to mention difficult to collect overseas the ROI) this source of Foreign investment will dry up

    I dont want to be pessimistic or paint a doomsday scenario. I dont say the West is better or will fair better…but at least think the reality and facts should be put on the table so those expert Economists can extrapolate and mull over !!!!

  7. i am a chineses,i hate the contry, there’s no democracy,
    the cloud is dark,everything is dark
    i dont know where’s the future