I wonder if Smokey is still hunkered down in his bunker waiting for that imminent terrorist attack. He needs to emerge from his bunker so he can kiss my fat ass. Mike Shedlock details the ongoing crash in China. Their stock market keeps falling, their exports are falling, and their real estate market is imploding. I call that a crash. I dare that cur to show his face back on TBP and take his beating like a man. My advice to him if he rears his ugly mug is to duck.

Real Estate Crash in China Underway: Foreign Funding Down 80%, Land Sales Down 57%, Starts Down 27%; Expect Chinese GDP to Plunge

Inquiring minds are reading an excellent report China Real Estate Unravels by Patrick Chovanec, a professor at Tsinghua University’s School of Economics and Management in Beijing, China.
The report confirms many of the things I said would happen in regards to the Chinese real estate bubble and GDP.
Here are a few items of note.
Developers, burdened by 70% leverage ratios and loans threatening to come due, rushed to complete projects already in their pipeline, to put those units onto the market and raise cash.
That rush to complete inflated real estate investments, allegedly up 23.5% in the first quarter. Other statistics from the report tell the real story.
  • Year-on-year sales in Q1, for all real estate, was down 14.6%.
  • Residential property sales were down 17.5%
  • Office sales were down -10.2%
  • Sales in January-February were a disaster, falling 20.9% overall, compared to the first two months of 2011, -24.7% for residential.
  • Total amount of floor space “for sale” was up 35.5%, compared to the same date last year
  • Floor space of residential units “for sale” grew 47.4%.
  • At the end of 2011, total floor space “under construction” was roughly 4.6 times the floor space sold
  • A year and a half worth of excess inventory is hidden somewhere in the pipeline
  • New starts in April fell 14.6% year-on-year and 27.0% month-on-month, for property as a whole
  • Housing starts fell -14.4% year-on-year and -23.4% month-on-month
  • Office starts fell -21.0% year-on-year in April, and -45.1% compared to March
  • Retail property starts fell -18.7% year-on-year, and -36.8% compared to March
  • Land sale revenues in April (RMB 27 billion) were down -54.7% compared to April last year
  • Foreign funding for property development was down -91.4% in March and -80.8% in April, compared to the same months last year.

Clearly a crash is underway. The above stats also show the soft-landing thesis is written on toilet paper.

GDP Analysis

I like the analysis by Chovanec on GDP implications and the highly-overrated “soft landing” theory.

The “resilient” growth in real estate investment that seemed to promise a “soft landing” is not very resilient at all. It’s more like the last gasp of a market that’s running out of steam. Once the surge in completions plays out, the declining number of new starts will become the pipeline, and growth in property investment will flatten or go negative.
Property investment accounts for roughly a quarter of gross Fixed Asset Investment (FAI), and net FAI accounts for over half of China’s GDP growth. As I noted in January, in a back-of-the-envelope thought exercise, if property investment plateaus (growth falls to zero), it could shave as much as 2.6 percentage points off of real GDP growth. If it fell 10% (in real, not nominal terms) it could bring GDP growth down to 5.3%.
At the time I first saw this dynamic in the data, when the Q1 numbers came out, I figured it would take several months to begin playing out. But the April numbers suggest it is already happening.

Chovanec notes if real estate investment drops by 10%, GDP will come in at 5.3%. What if real estate investment falls by 20% or 25%? Moreover, why shouldn’t it?

Nails in the Hard Landing Coffin?

One of the sillier stories making the rounds earlier last month was China currency move nails hard landing risk coffin

I responded at the time with …

The longer China puts off rebalancing its economy, the bigger the crash later on. Moreover, widening the band on its currency is a needed part of that rebalancing, and does not preclude in any way a huge slowdown in growth.
The structural imbalances in China are large and for now, still growing. However, huge cracks have appeared in real estate, and changes are coming up with a regime change. Finally, peak oil alone makes many of the growth estimates we have seen for China outright impossible.

The real estate crash has arrived. The GDP crash will follow. For details, please see 12 Predictions by Michael Pettis on China; Non-Food Commodity Prices Will Collapse Over Next Three to Four Years; Nails in the Hard Landing Coffin?

Mike “Mish” Shedlock

55 thoughts on “SMOKEY CAN KISS MY FAT ASS”

  1. I’d love to Smokey and flash get into it. Mr. Baby Batter versus the King of Cut-and-Paste. Supermarkets all over America would run out of popcorn.

  2. SSS-

    I can’t get down on Smokey’s level, but He and the Stuchmeister certainly had some epic blowouts worthy of a tub of popcorn fer sure..

    BTW , SSS, why do you want your libertarian friends thrown in prison?

    Really , I don’t know if I can support your Salma Hayek fetish any longer…your duplicity wit da’ man is just too painful.

  3. Mao’s Great Leap Forward cost upwards of 30 to 40 million Chinese their lives, one can only imagine what a leap backwards will entail.


  4. Picture didn’t post the first time.
    Mussolini is second from left. Third from left is his mistress. The others are associated Fascists.

  5. Fuck! One last time.


    Mussolini is second from left. Third from left is his mistress. The others are associated Fascists.

  6. My entire area is convinced the US needs its massive “defensive” military budget in order to stave off threats from Iran and China.

    Thats ok though, people are more concerned about the homosexual problem than they are about the economy or troops dying for nothing.

  7. Im not worried about outside forces attacking america.The usa well be destroyed from within.
    The miltary wields to much power,the corruption in washington makes me ill.

  8. Smokey, I do believe, is a calculating mind. Has it been six months since that cur Davos Sherman and that magnum pi mustached Austrian guilt tripped him into hiding?

    Six months. Like clockwork.

    China is a no-brainer. Their haughty smirk has been turned a worried scowl due to their stark refusal to continue lending our consumers cash to buy their tubs of rubber dog shit. They didn’t get with the program.

    Now they will suffer.

  9. And China is far from the worst of it all. I begin to wonder if runaway deflation will, after all, win in the end to most everyone’s surprise.

    Nah, never happen without an inflationary blow off to try and “save” the situation.


  10. I remember the Smokey/Stucky brawl well. It was just after the “he should have ducked” comment which I thought was funny. Smokey lit into Stuck about his man titties and his son, Then Davos, then exit stage left. Oh well, it’s been far too nice around here the last 6 months.

    Hostess was recently sold to the Chinese, these will be on Wal Mart shelves and ready for SNAP consumption very soon:


  11. Damn…not a peep out of SSS?

    I just wanted to say,I’m not one of those hatin’ Libertarians.
    I respect his right to imprison those who blatantly burn the rope in total disregard of the higher power that is the state…WTF are they thinking?
    Don’t the rope burners know that we are a nation of laws applied to everyone equally.


  12. Hey, that’s ok, Smokey is just waiting to laugh his ass off at all of us when it does hit the fan. Long live the Smokey!!!!!!!!!!!!!!!!!!!!!!!!!!!!! John

  13. Substitute US for China circa 2008.

    They are worse off than we are, because of the status of the dollar as the world’s reserve currency. Goldman Sachs is laughing there asses off at the Chinese, while stimulus accrues to the top 1% and austerity to the rest of us.

    1. Holy Shit

      That was the real Smokey. I knew I could lure the cur out from his bunker. Take your beating like a man. Stuck and Davos aren’t around to scare you off.

  14. Come out and play, you cur. There hasn’t been fireworks on this site since the dreaded “he should have ducked” thread of October 28, 2011 with 194 comments.


  15. Administrator,

    Some medical issues to deal with. Maybe I’ll be in the mood to thrash you in about 3-4 weeks from now. You were wise to slyly extend your prediction of the USA demise to a time framework more in keeping with my own. There is still another year and a half to two years left for the USA before total systemic economic collapse.

    Sometime in year 2020, the national debt of the US is likely to top $30 trillion (US Long before that year, inflationary pressures will have forced interest rates sharply higher than today’s 0%. If interest rates in 2020 are at, say, 7% , the interest on the debt will be $2.1 trillion. That will almost certainly exceed federal government revenues. As you are keenly aware, when debt service exceeds government revenue, that’s the end of the line. Fucking GAME OVER. Even if rates are at 4% at that time, this country will be finished. Of course, I’m not saying anything you don’t know. In fact, we’ll never make it to 2020.

    Regarding China—-It is important to keep a million house ghost city or two in the proper context.

    In the US, only NY City has a population of over 5 million. In China, 8 cities have a population of over 10 million, and 93 have a population of over 5 million. To me, a million person ghost city does not spell doom for a country that size that is in the midst of a multi-year transitioning of her citizens into housing.

    I have recently read stats on the projected real estate construction in China over the next few years, despite their attempts a ratcheting back, and it was mind-blowing.

    I’ll take a pass on any firefights until a much later date. Hi to Avalon.

    1. Smokey

      I wish you well with your medical issues. We look forward to your gentle touch back on TBP. I’ve been running curs off the site with barely a nudge. Grey Fox folded like a cheap suit this weekend. Anyone who has joined TBP in the last 7 months haven’t gotten to experience the legend of Smokey. Good luck and look forward to your return. Then I’ll give you a thrashing like you’ve never experienced before.

  16. Thanks, Administrator.

    I may comment a couple of times over the next couple of days.

    My guess is that I will be in the hospital later this week, maybe tomorrow, and will be there for a week or two.

    It is extremely unlikely that I engage in any firefights after I am released, so solly.

    But I may drop by occasionally to post comments.

  17. To me, a million person ghost city does not spell doom for a country that size that is in the midst of a multi-year transitioning of her citizens into housing. -Smokey

    Good luck with your health.

    But how many ghost cities does China have? China has said they wanted to build 20 of these a year. Thats housing for 20 million a year.

    Prices in Fuzhou, capital of the southeastern province of Fujian, had the worst property bubble with average house prices more than 70 per cent higher than their market value, according to the survey conducted in September.

    The average price in the 35 cities surveyed was nearly 30 per cent above the market value, the report said.


  18. Smokey, good luck with the medical issues. I’m on week three (of 8) of no weight bearing due to ankle surgery. Sux ass! My only regret so far is not getting the house set up to make using crutches easier. Prepare for recovery now if you can.

  19. That smiley should be, 8) as in (of 8). I have no freakin idea how or why a smiley popped up like that.


  20. Smokey – I wish you all the best. Not the same without you, in y opinion. You add realism, to temper the idealists, and a certain panache, around here.

    Get well and do not be a stranger.

  21. Smokey
    Hope the vasectomy goes well. I had to pee sitting down for three weeks after I had mine done. Dr. said not to do any heavy lifting!

  22. Fred—-I’d much prefer a vasectomy to this shit.

    Thanks for the kind words from JQ, Avalon, IS, KB, newsjunkie, Bluestem, LLPOH, AWD, SSS, Colma and the rest.

    Congrats to the Administrator on the steadily increasing traffic to this site.

  23. Kick that shit in the nuts (if it’s what I think it is), stuff it in a shopping cart and roll it down the street, Smokey.

    Boat drinks…

  24. BTW, the Grey Tiger turned paper tiger the second I posted…. not a minute before.

    Administrator’s been cashing checks and living the high life supping Corona Lights by the beach while I single-handedly keep the retard parades at bay between burritos and paddling in radioactive muck dodging mush-headed toadies who, I swear, are steering TOWARDS my flailing ass.

    LLPOH: How’s this for realism: Unless my newly endorsed candidate, Barrack Hussein Obama is re-elected, your muni-bond stash is going to vaporize so the poor rapscallion like myself can enjoy free hippy concerts over the summer…

    Change I can believe in.

  25. Administrator says:

    It’s my friendly disposition and good nature that keeps em coming back.”

    Either that or it’s because you allow the riff-raff to continue to post on your site.

  26. Colma I to am going to endorse Obama, I just want to get it over with, four more years of Obama shoiuld just about do us in. that will put us at about 75 milliom on food stamps at the rate it;s been increasing but that will be ok.
    Hope for change Hope it gets better, Hope the end comes quickly

    Sensetti for Obama– hey team

  27. Please no more jokes about him eating dogs, He only ate them while he was in the land of his birth Kenya.He no longer eats dog meat, ok first issue is resolved.

  28. In the first stages of the meltdown, animal shelters will ALL become no kill facilities.

    Quietly becoming profitable.

    Until they all run out of clients and are sent home.


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