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The Mother of all Bubbles.

 
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eeven73
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PostPosted: Mar 04, 2013 8:30 am    Post subject: The Mother of all Bubbles. Reply with quote

http://www.cbsnews.com/8301-18560_162-57572185/chinas-real-estate-bubble/

[youtube]http://www.youtube.com/watch?list=UU8p1vwvWtl6T73JiExfWs1g&feature=player_embedded&v=uxjwhk1ktNw[/youtube]

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ChrisG
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PostPosted: Mar 04, 2013 9:36 am    Post subject: Reply with quote

I saw that story last night on 60 Minutes. I couldn't believe how many new residential homes/apartments have been built that are unoccupied. Basically entire towns and cities that look like ghost towns. Pretty incredible. I was surprised 60 Minutes was even able to do a story on this within the country.
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b_girl
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PostPosted: Mar 06, 2013 7:17 am    Post subject: Reply with quote

... oh my.... That's insane...
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ohsix
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PostPosted: Mar 06, 2013 8:09 am    Post subject: Reply with quote

I see a lot of parallels to the Chinese investing in unoccupied real estate and Americans buying gold. It doesn't meet the criteria of a traditional bubble if people are just taking cash out of savings accounts and putting in real estate. A traditional bubble is asset prices increasing due to increased credit. The link says the apartments are paid for by middle class people with no other investment options trying to outpace inflation. Why do people buy gold? Both have little intrinsic value. I would argue that an unoccupied apartment has more utility than gold. Neither have cash flow. I'm not saying the apartments are a good investment, but when your options are savings account or real estate, I think the real estate is going to do a better job of keeping up with or outpacing inflation 10 times out of 10.
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vette74
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PostPosted: Mar 06, 2013 8:22 am    Post subject: Reply with quote

ohsix, The question is are they paying cash for the apartment or is it on a loan? If it is cash then there isn't a problem however if it is a loan it is only a matter of time.
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jt09
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PostPosted: Mar 06, 2013 9:17 am    Post subject: Reply with quote

i don't even think it's a matter of loan vs cash, it's a matter of 1) lies - they aren't all sold, or even close, and 2) the ones that do sell aren't occupied, which means it's not a winning investment, so it's only a matter of time before the total value of the real estate drops through the floor. and remember, it's the government footing the original bill for construction, which is fiscally unsustainable.
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PostPosted: Mar 06, 2013 9:46 am    Post subject: Reply with quote

I don't think it is accurate to say gold has little intrinsic value, it's what has been used as currency since the begining of time.
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ohsix
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PostPosted: Mar 06, 2013 11:48 am    Post subject: Reply with quote

Name one place where I can take some amount gold and buy a suit or a car or a meal. Gold may be more "liquid" than real estate, but I don't know of any developed country where gold itself is used as currency.

I'll watch the story again when I get someplace with a decent internet connection. I remember them saying that the building boom was fueled by people with no better place to put their money.
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eeven73
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PostPosted: Mar 06, 2013 12:04 pm    Post subject: Reply with quote

Historically, and for the majority of history gold was the most common currency equivalent.

I would say the story says that the Chinese Government is the fuel, the people buying are a result of the Governments management of the economy. It not that there is no better place they are not allowed to put the money there.

As an anecdote to the Chinese bubble anyone who wants a head slapper look at Las Vegas Sands Annual Report. Without China it is not a pretty picture. Off the top of my head there Vegas properites majority of revenue is an equal split between gaming and lodging. In China gaming is 3x lodging, and it isn't because they are giving away rooms in China. The rates are more than double.

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goofyboy
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PostPosted: Mar 06, 2013 12:08 pm    Post subject: Reply with quote

ohsix - Utah and soon Arizona will allow gold / silver as legal tender in their states.
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ohsix
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PostPosted: Mar 06, 2013 12:50 pm    Post subject: Reply with quote

eeven73 wrote:
It not that there is no better place they are not allowed to put the money there.


If they are not allowed to put their money into a better alternative, then I would say there is no better place for them to put their money. I would never say any one place is the best place in the world for someone to put all their money.
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