I have harboured concerns over China's growing bad debt problem/ credit bubble for over 2 years now. A recent quote cited by Prem Watsa is important:
Only 1 in 100 survived the 1929–1932 debacle if one was not bearish in 1925.
This was said by Ben Graham.
Prem Watsa has had a problem with global easy money and China's growing credit balloon. He is 100% hedged on his equity and recently, oddly, sold quality companies like Wells Fargo, J&J and US Bancorp from his portfolio to cover his massive short position on indices. He is also covering his company's ass against deflation.
And deflation seems to make sense when one thinks of the China's appetite for a lot of commodities diminishing very soon - there is a reasonable amount of consensus that for the last few years China had been importing some commodities just to avail of either stocking up or using it as collateral to finance more imports in a weird sort of ponzi scheme.
I recently read a very nice, short book called the One hour China book which explains a lot of what is happening there. The parts on manufacturing scale and the shadow banking system via trusts and wealth management products and loans made by state level organisations are very interesting.
Time will tell whether the China credit balloon will deflate over 10 years or more, or in a crazy implosion that will cause a severe recession in that country - and of course, the world as a result.
All that said, WB has often cited the uselessness of investing based on macro events.
But the ultra cautious - Klarman and Watsa are quite paranoid right now.
Things dont seem to make sense.
Addendum:
It's not often that Druckenmiller talks.
Talking about the Fed policy, basically saying that there is no systemic crisis but the ZIRP has to end now coz there is no need for it. And going by history, this policy will cause problems later.
Of course, he too says that despite compounding at 30% + for many many years, he was certain that the 1987 crash would lead to a depression.
Only 1 in 100 survived the 1929–1932 debacle if one was not bearish in 1925.
This was said by Ben Graham.
Prem Watsa has had a problem with global easy money and China's growing credit balloon. He is 100% hedged on his equity and recently, oddly, sold quality companies like Wells Fargo, J&J and US Bancorp from his portfolio to cover his massive short position on indices. He is also covering his company's ass against deflation.
And deflation seems to make sense when one thinks of the China's appetite for a lot of commodities diminishing very soon - there is a reasonable amount of consensus that for the last few years China had been importing some commodities just to avail of either stocking up or using it as collateral to finance more imports in a weird sort of ponzi scheme.
I recently read a very nice, short book called the One hour China book which explains a lot of what is happening there. The parts on manufacturing scale and the shadow banking system via trusts and wealth management products and loans made by state level organisations are very interesting.
Time will tell whether the China credit balloon will deflate over 10 years or more, or in a crazy implosion that will cause a severe recession in that country - and of course, the world as a result.
All that said, WB has often cited the uselessness of investing based on macro events.
But the ultra cautious - Klarman and Watsa are quite paranoid right now.
Things dont seem to make sense.
Addendum:
It's not often that Druckenmiller talks.
Talking about the Fed policy, basically saying that there is no systemic crisis but the ZIRP has to end now coz there is no need for it. And going by history, this policy will cause problems later.
Of course, he too says that despite compounding at 30% + for many many years, he was certain that the 1987 crash would lead to a depression.
