Author Topic: Is another Asian financial crisis developing?  (Read 4508 times)

Spekulatius

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Re: Is another Asian financial crisis developing?
« Reply #10 on: August 10, 2018, 03:43:44 PM »
I donít see a crisis in Asia either, but I could well see the trade issues affecting the sentiment and leading to outflows. Most countries are somewhat dependent on capital inflows and when it goes the other way, the currencies and stock market tend to suffer, Happens every couple of years (last in late 2015j and is really nothing special. Itís part of the EM cycle.
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Viking

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Re: Is another Asian financial crisis developing?
« Reply #11 on: August 10, 2018, 05:28:17 PM »
Ajc, my current strategy is pretty simple. I am now getting more cautious with my overall portfolio. I am holding larger cash positions (selling on strength like we have seen the past month or so). This will allow me to take advantage of sell offs when they happen.

For the past 5 years i have been pretty much fully invested most of the time. No more.

I expect at some point in the not too distant future (the next year or two) i will get quite cautious and likely move my portfolio mostly to cash. I am watching the economic data out of the US closely for when it starts to turn down. Looks good right now but storm clouds might be forming. I will be happy to earn a little less while i sit amd wait for the next big down draft in stocks :-)

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/your-returns-in-2016/msg285229/#msg285229
http://www.cornerofberkshireandfairfax.ca/forum/strategies/what-do-folks-think-or-do-while-markets-are-at-highs/msg325599/#msg325599
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/your-current-cash-weighting/msg23739/#msg23739
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/all-the-negative-news/msg24148/#msg24148
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/big-warning-sign/msg22442/#msg22442
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/top-picks-for-the-new-year/msg13668/#msg13668


For someone that's been fully invested for 5 years you seem to post often about holding lots of cash and being worried about the macro picture. Pretty much all throughout your forum career from what I can see, in fact.

Alwaysinvert, thanks for the trip down memory lane :-) In broad bresh strokes, i had large cash positions in 2010-12. My concern was that we would slip back in to Great recession part 2. Fortunately i changed strategies about 5 years ago and have been close to fully invested since. The one big exception was a few months after Trump was elected; i moved to 100% cash for a short period of time as i was quite concerned with what he was saying and doing. Fortunately (after deciding Trump would not be blowing up the world) i moved back to fully invested. And yes, earlier this year i expressed concerns regarding higher rates and the winding down of QE. I did raise some cash but returned to 100% fully invested too quickly. I am slowly learning that i need to keep a higher cash balance and to be much more patient when putting my cash to work.

And, yes, it can be quite difficult to follow how a person is actually invested based on their posts as the trail will be incomplete (as it is missing important information). Best of luck :-)

John Hjorth

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Re: Is another Asian financial crisis developing?
« Reply #12 on: August 11, 2018, 04:17:16 AM »
Gents,

How about China and its internal mountain of debt, shadow banks, real estate construction folly [whole empty "ghost" cities] etc.?

Some numbers here: [Source : Forbes: Worlds largest companies & Wikipedia: Contries by GDP].

China:

Major banks - total assets:

ICBC USD 4,210.9 B
China Construction Bank USD 3,631.6 B
Agricultural Bank of China USD 3,439.3 B

Total : USD 11,281.8 B

China GDP : USD 12.014.6

USA:

Major banks - total assets:

JPM : 2,609.8
BAC : 2,328.5 B
WFC : 1,915.4
C : 1,922,1

Total USD 8,775.8 B

US GDP : USD 19,390.6 B
« Last Edit: August 11, 2018, 04:19:16 AM by John Hjorth »
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ajc

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Re: Is another Asian financial crisis developing?
« Reply #13 on: August 11, 2018, 09:57:55 AM »

Some qualifiers:

- According to Peter Lynch, everyone on this thread already spent more time on macro than they should.
- At the same time, there hasn't been a gut-wrenching, international economic crisis for a decade. Even with tariff actions, the global economy is chugging along nicely. Maybe too nicely.
- The material below is from a socialist-leaning channel, so take it with salt. Then again, that doesn't mean the logic can't be accurate.

Yilmaz Akyuz is chief economist at the South Center in Geneva.

Before that, he was the director of the division on globalization and development strategies at the United Nations Conference on Trade and Development.
He was also head of the team preparing the trade and development report, and UNCTAD coordinator of research support to developing countries (the Group-of-24) in the IMF and the World Bank on international monetary and financial issues.

His critique of systemic emerging market risk seems reasonable. Here's a summary he gave of it, while promoting his book. The intro is by former Bank of International Settlements secretary general, Peter Dittus:

https://www.youtube.com/watch?v=k1-j5JEI49A

I'll leave the macro now and head back to my usual program. No point going way down this rabbit hole. Appreciate y'alls perspectives.



Cigarbutt

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Re: Is another Asian financial crisis developing?
« Reply #14 on: August 11, 2018, 02:36:11 PM »
This thread is likely relevant if one is looking at Altius, Brookfield Asset Management etc

Hard to say if this is just noise, as most of the times, it is.
Looked up an old file on the 1997 Asian crisis and 1998 Russian default that followed.
After the fact, many voices heard to explain why it happened but it seems that most, prospectively, felt that a Russian default was not in the cards (nuclear power etc).

Around that time, LCTM was thriving. It was composed of very bright people using advanced risk management tools and yet they did not see how noise could become contagion and how a relatively ordinary flight to safety movement could bring its demise. After the fact, they described a "perfect storm"...Also, mostly after the fact, many expressed views that the LCTM flaws were obvious (leverage and investments in relatively esoteric and illiquid securities (like Danish mortgage bonds :)...). The point of this post is that it may be very hard to know when noise becomes contagion and the contagion phase is when you "see" hidden risks that were there all along. LCTM looks now like a blip on the chart but, then, was felt to be significant enough to cause larger systemic issues and to necessitate a Wall Street banks consortium bailout brokered by the maestro.

Surprises will come "but timing, degree, & liklihood is anyone's guess."

How about China?

Not an expert but interesting to note that debt intensity (unit of GDP generated per unit of debt) has been coming down rapidly and has joined the downward trend and level of more "advanced" economies. China has achieved this "milestone" way before its planned transformation from a capital intensive model to a domestic consumer model. Add to that that debt and GDP numbers may not be reliable and GDP there is not really an output measure but ends up where it ought to be. One can question how the "West" deals with failures and transitions but, for China, this is history in the making and I doubt that dealing with inevitable failures to come will be easy.

rb

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Re: Is another Asian financial crisis developing?
« Reply #15 on: August 11, 2018, 07:10:39 PM »
Gents,

How about China and its internal mountain of debt, shadow banks, real estate construction folly [whole empty "ghost" cities] etc.?

Some numbers here: [Source : Forbes: Worlds largest companies & Wikipedia: Contries by GDP].

China:

Major banks - total assets:

ICBC USD 4,210.9 B
China Construction Bank USD 3,631.6 B
Agricultural Bank of China USD 3,439.3 B

Total : USD 11,281.8 B

China GDP : USD 12.014.6

USA:

Major banks - total assets:

JPM : 2,609.8
BAC : 2,328.5 B
WFC : 1,915.4
C : 1,922,1

Total USD 8,775.8 B

US GDP : USD 19,390.6 B
I'd say that's cherry picking some numbers.

China's non-financial debt us 256% of GDP. This compares with the US at 251, UK at 283, the euro area at 258 and close to you, Denmark at 264. That's not a small number but it's not apocalyptic either.

Does thins mean that China can't run into some financial system problems at some point? Not at all. In fact they probably will. Everybody does. But as I've said previously they are better equipped to deal with a situation like that. So it's more likely that they'll avoid a full blown crisis.

Now because of this situation should people line up to invest in Chinese banks? I don't know. But as sure as hell I'm not.