An Exodus of Capital Threatens the Chinese Economy w/ Guest Michael Nicoletos - Loonie Hour Ep. 144
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Foreign direct investment has turned negative in China as capital leaves. The property market is wobbling and threatens to bring deflation to the rest of the world. The devalued Japanese Yen is creating headaches for the Chinese manufacturing sector. What are the implications for Canadians?
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What a brilliant guy! Loved this conversation. Please bring him back in 6 months.
Will do.
"The Toronto Condo Update
Condo inventory in Toronto has reached a record 10,688 units. Meanwhile, sales fell by 28% in June while this inventory rose by 16% and active listings shot up by 70%.
The people who are willing and able to look for a home right now can't live in a 1 bedroom condo with a max 600 square feet. This is the classification of the vast majority of the units available for sale right now. These units were solely built for investors to rent out because at the time it made economic sense for the developers, the investors and the city to collect their precious taxes. A money grab for all involved. No one ever thought about the end user that is currently in the market shopping for a livable condo right now.
Now that end users are calling the shots, hopefully developers will put all future efforts into building larger, more livable condos. "
Sincerely, this was one of the best conversations on Loonie hour. You need more people like this.
This was a great podcast
Thanks, Mark.
This fella is very helpful with his relative examples.
In a future episode, I'd love to hear Michael's views on how the Chinese Belt & Road program fits into the Chinese puzzle. China could really benefit from importing African commodities, and using Ethiopia, Djibouti, Sri Lanka, Bangladesh as offshore manufacturing hubs.
But then how do they keep jobs in China? Last time unemployment bumped up Tiananmen Square happened. CCP is doing all this to keep people working and not thinking about their oppressive Gov is what I’ve been told.
this guy is great at explaining these complex things very simply
Amazing Guest, i hope i hear from him soon.
"If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand." Milton Friedman
Soooo many realtors on TH-cam, I’d like to see google stats on how many realtors have boarded TH-cam in the last 2 years.
Well they’re not selling many homes so TH-cam might be a necessity rather a hobby.
I’m sure it helps within real estate also.
Amazing conversation! Thank you!
Love the guest today!! Very interesting to dig in to.
Great guest. Thank you Michael for your time!
Steve, I remember in 1999 there was a line up made up of mostly Asian people waiting to put a down payment on one of the condo pre-sales in Burnaby. I stopped and asked someone since there were a half of dozen coaches parked nearby. Same story, they picked up loads of people at the airport, drove them to put their down payment and back to the airport. It goes way back before the year 2000 and all the governments turned a blind eye to it. We could be at the beginning of what could be an epic unwinding.
Money laundering to get money out of their country.
First through inflation, than through deflation.....
an episode worth listening over again. Good job 👏 👍
Thanks, Joe.
Best interview yet. Thanks fellas. I stay tuned for the whole thing.
Thank you, Leslie.
Awesome as always. So appreciate the closing comments - if, from a policy perspective, Canada takes its head out of its you-know-what and focus on energy (both O&G and Uranium) and focuses investments on making it easy to both do business with and in Canada, there is a solid trajectory to gain from the US friend-shoring and localization drive. Let’s go!!!
Awesome episode!
By some estimates Mexico City has the most museums in thr world. Big culture hub. And only one flight away from most Canadian cities!
Great guest. Thank you.
Steve: Chinese buyers peaked 2016, 2017
Michael: Now imagine Chinese are going to take their money out of China
It didn't register to the dude that he's almost one full decade off reality eh lol
Looking at Nicoletos past predictions betting against him has a significantly better batting average. Fed rates, USD, etc. He pivoted to crypto for a reason.
The Canadian house price average is double the American average house price......we do not have the economics for this to be the case.....In the early 80s when the housing market crashed....Government revenue from manufacturing, fishing ,forestry. mining could just barely sustain the economy..we were hoping there would be an American housing boom to increase the forestry sector revenues.
Relying on real estate to bail out your economy is not sound economics..as is being experienced right now...to hope a rate cut will save the market is just kicking the can down the road.
Wages will never catch up for future Canadian buyers to purchase a home....esp. with unlimited immigration keeping wages low or even lower
Our house price average should at best be on par with the Americans.....point being is we do still have high house prices including condos.....
This is being propped up by foreign buyers.....Canadians dont make high enough wages to be the cause of the high prices....there are always the outliers of course
All commonwealth countries have had a run up in prices. Local wages cannot support these real estate prices. Has to be a foreign source. It’s still Chinese money washed through Hong Kong. There is no other reason for this massive disconnect that will not burst.
Great Job!!! Thank You... :-)
Thanks, H.
I enjoyed this episode a lot
Thanks, Ike.
greek people are some of my favourites.
i love the food
As a guy who married a Greek currently living in Saskatchewan, I appreciated this episode. Only thing missing was the SK shout out.
absolutely fascinating fascinating. also learned that "countercyclicallity" is a word
I wonder why the media is not covering this? It could have significant negative effect on Canadian Real Estate.
good guest guys!
Excellent podcast guys
Thanks, Mike.
would have been the best episode ever if Richard had worn a Sombrero
That's true.
26:14
Steve cuts off the guest from saying something he doesnt want us to hear.
The general public thinks the foriegn buyers ban stopped chinese money from buying our RE, but anyone with their ear to the ground knows it has never stopped.
Nope. Still coming. Still no price correction in Vancouver.
@@dinoa9608
And ALL the Vancouver Realtors know it.
This is very insightful. Can you trust any of the "official" data or figures coming from the PRC?
How much of this Hong Kong / China invoicing scheme is triad fentanyl money. Could be another reason for large outflow. Money then cleaned or snow washed in Canada and other commonwealth countries.
I wonder that the net effect on SFH in Canada would be. On on hand, interest rates will go do with deflation, so more buyers. On the other hand, rental income from extra rooms / basement suites will also go down, and also unemployment will increase.
Every country is cooking their own books these days. Talking about who is bad and dangerous is very subjective. I live in Canada and China. I can say with confidence that China is still improving their quality of life. Cost of living is really favourable.
Why doesn't China do like Justinderpal did to Canada and admire Justinderpal"s Basic Dictatorship and open their borders to unlimited immigration, it's working great here.
And!!!! Late Friday BoC cracks wide open the Overnight Repo Markets cause well liquidity is "tight" due to T1 requirements.
I have some land in Utah for y'all
Bank of Canada announces increases to the dealer and round limits for Overnight Repo operations
Notice - Friday, July 12, 2024, 14:00 (ET)
Effective Monday, July 15, 2024, dealer limits for Overnight Repo (OR) operations will increase to $3 billion for each eligible participant from the previous $1 billion. At the same time, the maximum aggregate cash value amount offered in each auction will increase to $8 billion from the previous $5 billion. The Bank is implementing these changes to maintain the effectiveness of the ORs, in view of the structural changes in the overnight funding market after the industry-wide transition to T+1 settlement. The transition has led to a significant increase in CORRA-eligible repo volumes.
Hey Steve i know youre a fan of realvision so I was wondering what you thought about Raoul Pals thesis about the cyclical market seasons. According to it we are heading into "summer" which mean a lot of liquidity etc coming in. Kinda goes against the grain saying things will be booming soon and not the other way around. Maybe you guys might want to talk about it at some point. Would love to hear your guys views.
Either way thanks for another great episode!
How do we make money with the coming deflation?
During inflation, owning assets with borrowed money.
During deflation, have cash and lend money
By getting out of your investments and not getting fired from your job.
Bitcoin!
No up in price 😂. Wait 5 months .
The key difference between Bitcoin and the other cryptos (other than it being first obviously). Is the faith people have in it being worth something, despite there being no intrinsic value. Most other cryptos are valued against Bitcoin and if that belief disappears all of them lose value. In that way I think of all the other cryptocurrencies as derivatives of Bitcoin.
Does Justin Trudeau still allow the Canada Pension Plan to have 9% of it's total value invested in China? with China's stance on Taiwan (Constantly threating Military invasion.) does Canada still give them Foreign Aid?
Bitcoin is 100% different from the rest. It's all community. No CEO, No main person to headhunt. Governments hate this as you can tell. If you don't understand something it's best to not throw your opinion on it
51:00 Not sure how he could say China hasn't been selling US treasury, according to the official US Treasury website, China's US treasury holdings decreased from $1033.8B in Jan 2022 to $770.7B in April 2024. What is this guy's credentials anyway, is he a Greek realtor or something? I don’t think he’s as smart as Canadian realtors which are all like academic economists 😁
Finally someone I can have some trust in on International Matters👍 - 👍 - 👍. There are very few that I deem educated enough or they tap dance a lot
What does he mean in Greece we blew up?
Government debt defaulted resulting in banks also going under with bailouts needed everywhere.
@1:05:50 pumper/doomer, potato/tomato
What about brics? China working with Russia and others to mive products to market
if any of you ever visited China in the past 5 years, your discussion would be different. Maybe watched some TH-cam can help.
Vancouver is effectively Chinese territory. In 50 years, they could claim it and who could argue that it doesn't belong to them? It has effectively been colonized. I'm not moralizing it, just stating a fact.
SO WHAT ARE WE AS CITIZENS SUPPOSE TO DO WITH CASH IN OUR BANKS? WHATS THE BEST WAY TO KEEP IT AWAY FROM THE GREEDY BANKERS FROM STEALING IT
Buy commodities, physical things!
Gold/silver
anything other than keeping it in the banks.. literally, anything else.
I thought Mexico city was dangerous
Hide your daughters, Rich is in town
@@edubmf😂
One quiet Sunday afternoon while y'all are drinking on the deck....
Shit happens.. Coming real soon.
Deleting my comments ?
China will nationalize the banks. In Canada we will save the banks and foreclose on overleveraged home owners. I don't think China should be worried. I think we should be scared of contagion. China could literally be doing this on purpose with the strategic purpose of taking out Western economies.
That mustache is a war crime
Not in Mexico it isn't
Your guest speculates and assumes far to much. But he seems to be a very nice fella.
As an Chinese immigrant, Michael's description about Chinese economy situation is 100% accurate.
If youre not advising.. then what are you doing entertaining? Im a bit confused on the specific intention of these videos
Michael is the only one not sucking on a microphone and I can hear him just fine! Rich looks like he's performing felatio on his mic... highly distracting.
Real estate only goes up
Up in smoke!
@@Jo-mf2vuBam!
@@Jo-mf2vu The charts say otherwise
@@toddfromwork8931 Depends what part of the chart you are looking at, but from 2022 till now it has been dropping and it looks like it will drop further for the next few years.
Oh lovely. Chinese money will flood Canada at a blistering rate at this point.
So buy real estate and other assets that benefit from inflation
The guest said the opposite, 27:01 that it's likely Chinese will have to sell assets abroad and bring money back. So that means Chinese selling Canadian real estate. Not good for house prices.
@@toddfromwork8931What's happening in China is deflationary for the rest of the world not inflationary.
China runs an investment led, export led economy where you are basically suppressing the populace's living standards to subsidize exports and investment. The good is that you have immense productivity in areas that you want, the bad? Low internal demand. And the country in general don't have the confidence to basically spend. Thus it creates a vicious cycle. Imagine you have an economy whereby the locals simply don't consume all they produce because they are used to being artificially suppressed, what you would have is similar to what you see in China, little external debt, huge economic imbalances and very large internal debt to balance out the excess production and low consumption. If you can export all that, great, but it's rather hard. Making it worse is this little tidbit: because the Chinese have a consumer base that is real estate heavy, a lot of that internal consumption went into real estate which is really another form of investment in a way. So this stupid idea that China needs to hit a certain gdp growth number by a certain unrealistic percentage each year is making things worse as the guest mentioned because say if you can only squeeze 2 percent in actual gdp growth, you will try to make up the rest by investment and export which is highly inefficient hence you get this 13 times to 1 ratio on internal debt to additional gdp.
Now, it does have a few things going for it. For one thing, you dont achieve their amount of export success without massive rise in productivity. So where do you get ten trilion? Well, for one thing you can print it and see if inflation hits. The reason why there is actually a chance that massive inflation won't hit in China if you do that is because their internal productivity is high. Second, one chinese regulator at WEF once remarked that china has never had a financial crisis, markets are based on signals and because china controls all the signals, they can basically lie their way to stability for a while but it adds inefficiencies to it.
In the end, what is more likely for china is actually a japan and the risks are massive deflation despite more money printing and internal debt, if you look at the two countries you see similarities.
1. Export led growth through subsidies
2. Aging demographic
3. Internal state managed sectors, japan used to have the ministry of finance which basically does this.