Drumbeat: January 10, 2010

China's commodity imports soar in December

BEIJING (Reuters) - China ended 2009 with record monthly imports of crude oil and soybeans and a strong appetite for iron ore and copper, while its aluminum and steel sectors saw a welcome increase in export volumes.

Crude oil imports averaged more than 5 million barrels per day for a month for the first time in December, up by more than a fifth from November at 21.26 million tons, while the total for 2009 rose 13.9 percent to 203.4 million tons.

The return to double-digit annual growth followed a 9.6 percent rise in oil imports in 2008 when prices rose beyond $100 per barrel. In 2009, China's refineries racked up processing volumes to power a recovering economy, aided by a fuel pricing regime that largely guarantees a fixed margin.

But in a sign the volume of oil imports might not reflect real demand, the country, traditionally an importer of refined fuel, flipped to being a net seller as a 64 percent leap in exports outstripped a 39 percent rise in imports.

Neighbors Challenge Energy Aims in Bolivia

LA PAZ, Bolivia — President Evo Morales’s leftist government, which has asserted greater control over some of South America’s most coveted natural gas reserves, is facing a challenge as neighboring countries move to achieve energy security by cutting their dependence on Bolivian gas supplies.

New gas projects in Brazil and Argentina have come on line at a time when Mr. Morales is winning plaudits for a strong economy. It grew 3.7 percent last year, enabling him to consolidate control over energy resources, including natural gas, South America’s second-largest such reserve after Venezuela’s, and huge lithium deposits.

But even as Mr. Morales has emerged as one of the region’s strongest leaders, bolstered by a landslide re-election victory in December, concern is surfacing here over Bolivia’s long-term financial underpinnings as its neighbors start importing gas from distant sources like Qatar, and not so distant ones, like Trinidad and Tobago.

The reorganization of South America’s energy relationships is being closely followed by countries trying to limit their reliance on energy-rich nations that are in political flux or that use their resources as a political lever, as Russia’s state energy company has bullied former Soviet republics and Europe.

Afghanistan: only the first move in the grand chess game for control of Central Asian resources

Though not being reported in the mainstream American press, there is a very intense struggle going on between the U.S. and China to determine which nation will emerge as the dominant presence in Central Asia. These two economic giants, the U.S. declining and China rapidly growing, know full well that their economic future depends entirely on their ability to acquire critical resources; in the case of the U.S., it's primarily oil, while with China it's both oil and natural gas.

Iraq to finalise oil deals later this month

BAGHDAD (Reuters) - Iraq's Oil Ministry will finalise deals later this month with foreign energy firms for its Majnoon, Gharaf, Qayara and Najmah fields, a ministry official said on Sunday.

Sabah Abdul Kadhim, the head of the legal section of Iraq's Petroleum Contracts and Licensing Directorate, said the ministry would sign a final service contract for super giant Majnoon, which was awarded to Royal Dutch Shell and Malaysia's Petronas in a December energy auction, on Jan. 17.

Alaskans should get fair share for oil

Last month, 15 members of the State House's Republican-led majority wrote the governor calling for a review of whether we should rewrite our 2007 oil tax reform law (known as ACES) and roll back the oil revenue the state receives for our resources. If that debate proceeds, it's important for Alaskans to understand some of the generous investment incentives in Alaska's current law, which have spurred new North Slope development, but are rarely mentioned by those seeking tax breaks.

Russian oil flows to Belarus despite talks failure

MOSCOW (Reuters) - Russian oil continues to flow to Belarus and via Belarus to the European Union despite a failure by Moscow and Minsk to clinch a new oil supply deal at talks on Saturday, an Russian energy ministry spokeswoman said on Sunday.

A Disobliging Update on the Price of Oil

There still seems to be a deplorable uncertainty about the future price of the most important commodity in the world. A few months ago Philip Verleger – now apparently guest professor at the University of Alberta (Canada) – predicted an oil price of thirty dollars a barrel (= $30/b) for the end of the 2009, and now Mr Chris Watling – chief executive for Longview Economies – forecasts a sharp drop in the oil price (2009). He bases this forecast on an increased oil supply by Saudi Arabia, Iraq and Kuwait – who together have about 38 percent of the global oil reserves – and he also envisages an unchanged or increasing oil production by Canada, Brazil, Angola and Kazakstan.

I won’t waste my time with Verleger’s failed prediction, since instead of $30/b, the year end price for oil was closer to $75/b. But I will say that Mr Verleger has been on the oil conference circuit at least as long as I have, and he should understand the intricacies of the oil market as well as I do. Mr Watling however seems to have an information problem, by which I mean that he has received too much of that theoretically valuable commodity. He is a victim of what might be called a Greshham-type law: bad information driving out good.

'Monster' well in Arlington is top producer in Barnett Shale

A natural gas well with the nondescript name "Day Kimball Hill #A1" was the seventh Barnett Shale well drilled by Chesapeake Energy at a site in Arlington in far southeast Tarrant County.

The first six wells drilled there have been average or above average in production, said Dave Leopold, Chesapeake’s operations manager for the Barnett Shale. But Chesapeake CEO Aubrey McClendon has a more dramatic description for the seventh well.

"It’s a monster!" he told the Star-Telegram in a recent telephone conversation.

Dozens of Qaeda militants 'hiding out in Yemen'

SANAA (AFP) – Dozens of Al-Qaeda jihadists are hiding out in a remote area of Yemen, a top official said, as President Ali Abdullah Saleh on Sunday urged militants in the conflict-ridden country to lay down their arms.

Al-Qaeda fighters, among them Saudis and Egyptians, have streamed in from Afghanistan and have joined local members of the jihadist network in lairs carved out in the rugged Kour mountain in southern Shabwa province, said provincial governor Ali Hasan al-Ahmadi.

Three Gorges' underground power station to start operation in 2011

YICHANG (Hubei) (Xinhua) -- The first underground turbine of the world's largest hydropower project is expected to be put into operation in 2011, according to the China Three Gorges Corporation (CTGC).

N.C. utilities thinking big with solar power

CHARLOTTE, N.C. — Thousands of panels are soaking up the winter sunshine as Duke Energy launches its solar rooftops program under North Carolina's new green energy law.

For the first time, Duke and Raleigh-based Progress Energy will have to make a smidgen of their electricity this year from the sun.

By Landing Fleet, Small Port Sets Off a Storm of Envy

NEWPORT, Ore. — Fishing and timber are not what they once were, and the recession has slowed the rush for second homes. So it seemed the fate of this small port was clear: more struggle.

Then Newport, with fewer than 10,000 people, pulled off a stunning economic upset. Last summer, it outbid and outmaneuvered three ports in Washington to become the home, beginning in 2011, of the Pacific Fleet of the National Oceanic and Atmospheric Administration.

U.S. economy in trouble and why

"The U.S. represents 4.8% of world population. We use 25% of the energy produced on earth and 30% of the materials produced on the planet. Some of those people who represent the other 95.2% of the global population are beginning to want their share and are getting a little testy about the whole thing.

"Over our lifetimes we consume 75% more than our European counterparts and more than 1000% of that of the folks in 3rd world nations. The U.S. hit peak oil in 1970 and today we use 40% more oil and produce 40% less than we did in that pivotal year.

Heavy Rains End Drought for Texas

HOUSTON — The worst drought to strike Texas in the last 50 years has broken, ending a year-and-a-half dry spell in which farmers and ranchers suffered devastating losses, climatologists and agronomists said this week.

Heavy rains since September have replenished reservoirs, filled stock tanks and quenched huge expanses of parched earth across Central and South Texas, where state officials estimate that farmers and ranchers suffered losses of around $4 billion.

John Nielsen-Gammon, the state climatologist, said that while some pockets along the Gulf Coast and in the Panhandle remained drier than usual, most of the state had recovered.

“The back of the drought is broken,” Mr. Nielsen-Gammon said. “It’s still lingering in a few areas, but there aren’t any places right now feeling acute drought.”

The rains came too late for many ranchers in South Texas, who were forced to send to market most of their cattle, including breeding stock. Cotton farmers suffered, too. In Kleberg County, the entire cotton crop failed for the first time since 1904. The yields in two other nearby counties were barely 5 percent of normal.

Ben Bova: Are we doomed to dither and deny as Earth grows warmer?

Despite the desire for peace, despite the appeasement, despite everything, the war came. More than a hundred million people were killed in World War II. Much of Europe and Japan were smashed into rubble. The war cost trillions of dollars.

Are we going through the same dangerous routine in dealing with global warming? Are we dithering when we should be acting? Are we clinging to the hope that it will go away if only we ignore it? Are we denying that the danger is real?

I fear we are.

The end of consumerism: Our way of life is 'not viable': New report says we must embrace a basic future to survive

Almost seven billion people are demanding ever greater quantities of material resources, decimating the world's richest ecosystems, and dumping billions of tons of heat-trapping gases into the atmosphere.

And any actions taken by governments, or scientific advances to deal with climate change, are doomed to failure unless individuals get back to a basic way of life, concludes the report – which recommends things like borrowing books and toys from libraries instead of buying them, choosing public transport over the car, and growing food in community gardens. In addition, all products should be designed to last a lifetime and be completely recyclable.

A seismic shift in thinking is needed, according to senior researcher Erik Assadourian, project director of the report: "Making policy and technology changes while keeping cultures centred on consumerism and growth can only go so far. To thrive long into the future, human societies must shift their cultures so sustainability becomes the norm."

The unintended ripples from the biomass subsidy program

It sounded like a good idea: Provide a little government money to convert wood shavings and plant waste into renewable energy.

But as laudable as that goal sounds, it could end up causing more economic damage than good -- driving up the price of raw timber, undermining an industry that has long used sawdust and wood shavings to make affordable cabinetry, and highlighting the many challenges involved in decreasing the nation's dependence on oil by using organic materials to create biofuels.

used sawdust and wood shavings to make affordable cabinetry

They should have added furniture.

I have an instinctive negative reaction when I see glued together sawdust. The glue used is a petrochemical (AFAIK) and the sawdust panels simply do not last. The result is that the entire assembly (including the wood fronts, hinges, handles) is thrown away in a few decades. Same for furniture.

I bought some cabinets and it was difficult to find ones with wood (poplar I think) backs and sides. Cheap wood lasts longer than sawdust.

I am sure that a surplus of cellulose is developing in any case. The decline of newspapers, recycling and construction slowing down should be combining to create more forest growth than harvest.

Best Hopes for Durable Goods,


Very true. It isn't just furniture however - builders used OSB instead of plywood in some cases - again because it was cheaper. If that ever starts to go bad, you have a lot harder time replacing it..

I have seen the soggy mess that OSB becomes when it gets wet. One reason I think modern Suburbia & Exurbia will "bio-degrade".

Example: Due to hard times Suburban Homeowner cannot pay cash to replace or even properly repair his roof. His underwater mortgage precludes a second mortgage for this necessary repair. Hard driving rain and the OSB gets wet. End of story.


I have seen the soggy mess that OSB becomes when it gets wet.

An interesting development on that front, Alan. The company I previously worked for, Titan Wood, is in the process of commercializing acetylated OSB. It behaves just like acetylated solid wood. No more soggy mess. They have formed a separate brand for that, and you can read about the technology here:


Check out the section on Performance. Given that my experience with OSB had always been the same as yours, I was amazed to see the performance of the acetylated product. They have joined up with Medite in Ireland to build a demonstration plant based on the process.

Acetylated wood and OSB is promoted for uses where today sawn lumber, plywood or OSB is infrequently the material of choice. It would be wasteful to use it where OSB is commonly used.

Anyone whose exterior envelope permits his structure becoming soggy is in trouble no matter the building material. Water is toxic to buildings, Contain it inside and out, or suffer the consequences.

Oriented strand board, made with non-urea formaldehyde binder, as most is, is a very good material for sheathing and for engineered joists and headers. It is commonly made from fast growing small trees, like Aspen. Thanks to OSB, forests used for wood to manufacture plywood and sawn lumber can breath on.

I built my own stressed-skin trusses from OSB and 2 X 4 lumber to support the weight of my green roof. About 10 years ago I got 450 sheets of OSB (form. free) for $1000. We ripped them in half and glued/stapled them to a frame of 2 X 4s. This system turned out to be very strong and saved us a lot of $. OSB has great shear strength.

Thanks to OSB, forests used for wood to manufacture plywood and sawn lumber can breath on.

The only problem with this is that the loggers around here used to do modified selective cutting. It wasn't cost effective to cut many trees they couldn't sell. Now they cut everything and take it to the chipper mill.

It's been years since my brief experience as a chokerman (fastening multiple logs to a skidder or cat so that they can be dragged to a landing and loaded on a truck), but I expect that clear cutting is still the norm in the logging industry. If more of the clear cut can be used manufacturing building materials, then The --old growth, or second growth-- Forest can enjoy some respite.

I think OSB represents a significant technological advance and, unless it's demonstrated that in ordinary use, the 'board' is subject to 'de-binding', I'll continue to use it in building projects. At this point in time the service life of OSB is considered to be indefinite, which is considered to be something beyond fifty years. http://www.sps-dz.com/downloads/PDFs/osb_tectopics_lifetime_en.pdf I haven't seen any evidence that OSB will be any less durable than other wood products.

Another issue to consider is the crappy quality of most lumber these days.

I don't think you mean 'trusses' when describing your green roof project. It sounds like you made your own engineered joists. Trusses are triangulated and are usually a lot cheaper delivered than made yourself.

I would be interested in knowing how you finished your green roof (sheathing, membrane etc).

At this point in time the service life of OSB is considered to be indefinite, which is considered to be something beyond fifty years... I haven't seen any evidence that OSB will be any less durable than other wood products.

As I look out my window at the 1842 wooden house across the street (still sound and in good shape), I ponder that a mere 50+ years is considered "indefinite".

Such is the mentality of today's US construction industry.

Best Hopes for my 1938 old growth cypress and heart pine home,



Technically you are correct; joice would apply better though we did put truss type bracing in our frames. We tried to outsource a system but the cost would have more than doubled (with inferior results IMO). We built in slope, 1.5" per 12'. The joices are 24" at highest point. We built a 24' table and intalled a jig system with the slope built in. This simplified things a lot. 16" O/C was probably overkill, but I tend to over-engineer things. Decking is 3/4" T & G (subflooring) glued and nailed. Membrane is a double layer of Bituthene 5000 (also found at salvage) covered by 1/2" blue foam board (T & G, 4' X 9', funny size, salvage nobody seemed to want), 6 mil plastic and 2" of fine gravel (I drove my small tractor onto the roof, no deflection). I got about half a truckload of various LVLs (salvage, of course) which made the design easier and more fun.

I haven't greened the roof yet mainly because I ran out of steam and money. Soon though. I also wanted to observe the roof before committing time, money and tonnage.

A friend that works at a truss factory had the design evaluated at over 260 psf (off their scale), and an arch/eng friend calculated over 300, even cantilevered 5 feet (for solar overhang). That was enough for the inspector.

I may put a greenhouse on one section, as all of that roof seems like a big waste of space. I don't have any neighbors that might complain.

This simplified things a lot. 16" O/C was probably overkill, but I tend to over-engineer things.

Octet Truss, anyone? In terms of strength, simplicity, ease of assembly and economy of materials, it's really not a bad bang for the buck.


This reminded me of the Moulton space frame bicycle :-)


Best Hopes for Materials Efficiency,


I have seen the soggy mess that OSB becomes when it gets wet. One reason I think modern Suburbia & Exurbia will "bio-degrade".

I'm reading an interesting book called The World Without Us by Alan Weisman, and the very first chapter describes step by step how nature will reclaim today's cheapo houses.

Plywood has its own limitations and problems. It is possible, though, to use cold process and animal based glues. I doubt that PETA would appreciate it, but it results in less emissions and lower energy cost.


They should have added furniture.

AND bedding for cows.

Sawdust and shavings are at a premium now--or just unavailable--because of both biomass demand and a crashed building market.

When I was a kid, we used hay as bedding for animals. I am not sure why there is a need to use wood shavings for this purpose.

I suppose it comes down to money - it takes land to grow hay, and I imagine that they could make more money raising corn instead and buy the wood shavings.

Pellet stoves have gained popularity in recent years. As demand for forest products has declined recently, many pellet producers are having difficulty getting feedstocks for this biofuel, made of byproducts from sawmills, furniture plants, etc. Competition from wood ethanol producers will likely increase the costs of this more "honest" biofuel.


Let them burn corn !


Many pellet stoves will burn corn as well, but it drives up the cost of my HFCS. Can't have that!

The phrase that paid was "235930727-the-effects-of-genetically-modified-foods-on-animal-health" and the original web site is gone ATM. But the google cache claims:

The Committee of Research and Information on Genetic Engineering (CRIIGEN) and Universities of Caen and Rouen studied Monsanto’s 90-day feeding trials data of insecticide producing Mon 810, Mon 863 and Roundup® herbicide absorbing NK 603 varieties of GM maize.

The data “clearly underlines adverse impacts on kidneys and liver, the dietary detoxifying organs, as well as different levels of damages to heart, adrenal glands, spleen and haematopoietic system,” reported Gilles-Eric Séralini, a molecular biologist at the University of Caen.

Although different levels of adverse impact on vital organs were noticed between the three GMOs, the 2009 research shows specific effects associated with consumption of each GMO, differentiated by sex and dose.

So burning that corn may be a really GOOD plan.

If they do they will save money. Around here pellets cost about $4.29 for a 40 pound sack. Corn sells for around $3.90 for a 56 pound bushel. Wood pellets and corn have equal heat value per pound.

So corn is hardly cake. LP is the cake of heating around here.

I buy a couple of sacks of wood pellets a year anyway to start my corn stoves. I use a small propane torch on the wood pellets to get the fire hot enough so that the corn will burn. Straight corn is almost impossible to get going from a cold start.

It is a sad situation when corn is cheaper than waste wood and sawdust, but it is. Farmers have been fighting this situation for decades and that is why corn is used for ethanol. Even with all the corn being consumed by ethanol plants the situation persists. Corn is dirt cheap at a $3.90 cash price.

Every bushel I burn in my corn stoves saves 5 gallons of LP which sells for about $1.60 locally. That is the equivalent of $8.00 per bushel for corn. Yet few burn corn even in the country. They would rather not fuss with getting the corn, loading and cleaning the corn stove.

It's much easier to call the LP tank wagon and have it delivered even though it costs twice as much. There's nothing like having your cake delivered!

In a way I'm doing the same thing since I gave up on burning wood because of the work and the mess. Wood is much cheaper than corn, but the work is just too much for an old man. Corn is so much easier especially if you grow the stuff.

Correct me if I'm wrong, but 1ton of pellets = 100 gal oil.
@$4.29/40# bag, that's about $2.15/gal diesel equivalent. Not bad.
If corn has the same heat capacity, @3.90/56# bushel, that's about $1.39/gal diesel equivalent.

Is something wrong with my numbers? Why would anyone sell or buy pellets anywhere if corn is that cheap? If my numbers are right, then food prices have only one way to go.

In Juneau, pellets cost $7.99/bag or $3.95/gal diesel equiv.

Cold Camel

When I was a kid, we used hay as bedding for animals. I am not sure why there is a need to use wood shavings for this purpose.

It's mostly a matter of absorbency and ease. Hay works--we're using it "by default" now--but it's sloppy and not easy to shovel off the floors of the tie-ups.

When I was a kid, we used hay as bedding for animals. I am not sure why there is a need to use wood shavings for this purpose.

One reason is that hay is cow food, wood shavings aren't.

Several local sawmills in my area. If you're close to one you can generally get sawdust for next to nothing. Its too far out to come and get the stuff for any commercial use, plus it rains and getting a whole load of dry sawdust at these smaller operations is asking a bit much because it rains so much here (it generally rains before a truckload of sawdust accumulates) -- thus the local saw mills are inundated with sawdust and they are more than happy for somebody to come and get some for on the cheap or even free.

Hay may be cowfood, but wood shavings would probably please termites. Termites are edible.


Oh mom, we had termites last night :(

Converting wood to sugar then fermenting the sugar to make ethanol seems like a science fiction story. No one gets their sugar from wood. It came from sugar producing plants such as sugar cane, sugar beets, and sugar maple trees. For a nation to stake its destiny on a technology that has not been proven seems like another way to waste taxpayers hard earned money.

China growth of imports up 13.9% for the year
average 5 MBPD in December, according to Reuters

how do we reconcile this with Rembrandts monthly report, where China consumption is much lower?

what is the source of reuters info?

For October 2009 the Jodi data base has China producing ~3.8 mmbpd and consuming ~8.6 mmbpd thus importing ~4.8 mmbpd, so IMO 5 mmbpd doesn't seem far out.


A closer look at Chinese refinery output and consumption of individual products is available at the JODI Databrowser. For instance, a quick look at Chinese consumption of diesel shows that it has soared since March and this increased consumption has been met largely with stock draws:

The same is true for "Total Products" from the JODI database. From this dataset it appears that Chinese consumption has more than completely recovered from the downturn starting in mid 2008 and is set to break records again and again. (Until it stops, of course.)

-- Jon

Note that the JODI databrowser is very much a prototype. We put it together in order to examine the quality and utility of the information in the JODI database. Comments are greatly appreciated at mazamascience@gmail.com

This puts to rest that children's story that the Chinese were making cars, then crushing them because there is no Chinese market for the cars.

Hmm I seem to recall that after the claim of a massive number of cars being sold many people pointed out that oil imports did not match the claim.

I'd argue that this discrepancy has been fixed. I might add that the Chinese themselves claim a good bit of the imports are going into their new strategic storage and of course its seems their oil product exports have increased where they used to import.

The truth ?

Nowhere to be found given we don't actually know Chinese oil production internally.

I'd argue its all simply a circle of lies the first stories had some holes you could drive a million cars through.

Of course as always there are ways to check the story.


On Wednesday, the Baltic Dry Index (BDI) -- a widely tracked measure of marine bulk-freight rates -- fell by 0.3%, but that followed a rise of 8.8% over the two previous sessions, according figures reported by Dow Jones Newswires.

"After correcting 36% from the peak in November to [the end of] 2009 at 3,005, the BDI could be bottoming," said Goldman Sachs analysts.

Correcting for rising oil prices and more pressure on bunker fuel as people love to do with the oil and dollar then BDI is still in the toilet. Of course such a sharp turnaround should have sent both the BDI and bunker fuel rates soaring putting even more pressure on oil prices.


Not only are we sucking wind but the BDI is unable to even track oil prices for long before collapsing.

A bit of a Christmas surge as obviously people had let stocks fall to very low levels then thats about it. No matter what you do you eventually have to restock so you get a bit of a dead cat bounce following a sharp financial dislocation. This bounce is probably at the root of the spin.

But don't let a bit of common sense get in the way of things.

The trend seems solidly upward, though.

I think it just took'em a while to learn to drive all of those cars.

Does this set a precedent?

Hawaii can't afford Congressional election

Cash-strapped Hawaii can't afford to pay for an election to replace a congressman who is planning to step down next month to run for governor, potentially leaving 600,000 urban Honolulu residents without representation in Washington.

Budget cuts have left the state Office of Elections with about $5,000 to last until July, with a special election costing nearly $1 million, interim Chief Elections Officer Scott Nago said.

Very interesting ...
Wonder how that plays out ...

Since I'm reading Tainter now,
everything seems like an example of the cost of complexity.

Like a million dollar special election,
which no one can afford, but the law might require.

Along the same lines ...

Some strapped courts cut back on security
Courthouses around the country face the tough decision of whether to reduce services or cut back on security.

I see the WSJ is talking about the higher price of crude and food:

Commodity-Cost Jump Threatens to Stifle Rebound

Still, as higher commodity prices work their way through the production chain, they could damp any recovery by forcing consumers to spend more on essentials such as food and gasoline. They are also a concern for a range of industries, such as airlines and food processors, where rising input prices could eat into profit.

"Everybody is nervous," said Ronald Lucchesi, president of the frozen-products division of Gonnella Baking Co., a closely held Chicago firm that was battered by soaring wheat costs in 2008.

Greg Carlson, a hog farmer with 400 sows near Stratford, Iowa, said he was losing money on every pig he produces as meat prices fail to keep pace with the cost of feed. "There are a lot of companies that are right on the edge -- and we're one of them," he said.

they could damp any recovery

What recovery would that be?

Oh... the one that goes with 'there is no inflation' and 'unemployment has gone down.'

Sure is nice to be able to control the spin, eh?

There is nothing new out there, today. Or any day lately.

We all know where we are, and where we are going. The rest of the folks believe what they want, and listen to the spin. They continue to overpopulate, overconsume, overeat, and underthink. When someone shows up to tell them its okay, that they can keep on with BAU, they buy it. Quite literally. When someone shows up who tells them that it cannot continue, and that if it does it will destroy the planet, they want to kill the messenger... In Western democracies, we elect idiots who parrot the spin b/c that makes us feel good. That's what is about, you know. Feeling good.

Strange species, homo sapiens. Wonder if they’ll be missed.


Here's something interesting to chew on..

In China, fear of a real estate bubble

For investors, many of the usual bubble warning signs are flashing. Fueled by low interest rates, prices in Shanghai and Beijing doubled in less than four years, then doubled again. Most Chinese home buyers expect that today's high prices will climb even higher tomorrow, so they are stretching to pay prices at the edge of their means or beyond. Brokers say it is common for buyers to falsely inflate income statements for bank loans.

Some economists and bankers fear that they have read this script before. In Japan at the end of the 1980s and in the United States in 2008, residential real estate bubbles ended in big crashes, battered banks and slow recoveries. With China acting as a key engine of global growth, a bursting of the Chinese real estate bubble could be a pop heard round the world.

Bubbles always burst when prices rise as fast as they are in China. Suddenly there will be so many more sellers than buyers, sellers will panic, prices will drop sharply and the bottom will fall out. So too probably will Chinese stocks. At the rate their prices are increasing it shouldn't be long now.

When a country has an empty mall, an empty subdivision and an empty city, it tells you they are building way too fast. Just a little to exuberant.

Once it happens, it takes a long time to build back in. Our neighborhood still has several homes that are empty. The Banks don't even try to sell or rent them.

I guess the question is, how will the rest of the World's economy be affected by what happens in China?