China getting smacked tonight

At the end of Shanghai's morning session the main index is down 2.1+%

Shanghai 300

It appears the recent rules designed to curb property price speculation have bitten hard, from ChinaDaily:

According to real estate research institute China Index Academy, among the 35 cities it monitors, 21 experienced a fall in transactions last week, with Hangzhou suffering the biggest drop of 72.6 percent. Property sales in Beijing, Shanghai and Shenzhen fell 45.5 percent, 32.9 percent and 63.9 percent respectively over the previous week.

It will be interesting to note if this is just a pause that refreshes or if the Chinese consumer realizes the gov't will keep twisting the screws tighter until they get home prices to calm down. 

The Shanghai property index can be a useful indicator to watch.  If you notice it lead (or coincided with) all the previous major up and down trends from the last 3 years.

[edit: now down 3+% and breached low of Feb 3, 2010.  This is not a good technical sign ]

Greece -- The government subprime bomb continues smoldering

Bond yields continuing blowing out in Greece.  The question becomes what will trigger the explosion or defuse this situation???  Here's a synopsis from the articles mentioned below. I suggest you read both.

German Chancellor Angela Merkel is trying to wait on any decision until after the May 9 regional elections.  If the elections go poorly this could make it worse for Greece.

There are court challenges prepared for the bailout from Germany to Greece readied and it appears there may be a ruling from the German constitutional court in early May as well.

While I haven't found any news reports, I wonder how the Italians, Portuguese, and Irish think about bailing out the Greeks?  Their economies are a total mess as well and any resistance from these countries will also fan the fires.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7632366/Maastricht-madhouse-fuels-EMU-wide-contagion-from-Greece.html

http://www.ft.com/cms/s/0/47b429f4-5091-11df-bc86-00144feab49a.html

As I mentioned on the comment bar to the right, the official declaration for aid by Greece only helped their bond market for one day.

More base metal linkage

Some more base metal background information:

New Aluminum capacity coming online in the gulf, which makes sense. Considering electricity costs are a large part of the cost structure, getting close to low price energy makes sense.  Pity the high cost AL producer.
http://www.thenational.ae/apps/pbcs.dll/article?AID=/20100412/BUSINESS/704129895/1005

Substitution effect for copper, aluminum and plastic.  High prices in copper create demand destruction as other products are used.
http://www.indiainfoline.com/Discuss/Blogs/Copper-mania-redux/544390

Zambia copper production update:
http://www.reuters.com/article/idUSLDE62F11Y20100316

General copper overview as compared to CRB, industrial production, and the BDI
http://www.datadiary.com.au/2010/03/26/commodity-markets-going-up-or-down/

China importing copper
http://agmetalminer.com/2010/04/09/copper-prices-strong-despite-china-subdued-buying/

Have a good weekend.

Some evening linkage

Glad to see Mr. Faber is coming around to my opinion on China's coming bubble popping. :)

http://www.creditwritedowns.com/2010/04/marc-faber-symptoms-of-a-bubble-building-in-china.html


A video on strategic defaults from pbs.org



HT  -- http://www.ritholtz.com/blog/2010/04/strategic-defaulters/

Greek rates go crazy
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7621289/Escalating-Greek-default-fears-rock-Europes-debt-markets.html

Money Money + Money --> Money supply update

Money supply figures continue their decline on an abolute and/or relative basis depending upon how you measure it.  M2 + Institutional Money Market Funds (the only series left from M3) continues declining on a year over year basis, M2 on its own continues to decelerate.  Once the MBS purchases by the Fed finally settle I think the first derivative will continue to decline on both series.

Copper data dump

I've been building up some copper related links.  Here it is:

Majority of Chile's export currency comes from copper
http://www.businessweek.com/news/2010-02-15/chile-copper-exports-doubled-in-january-on-price-gain-update1-.html

LME is rasing storage rates on inventory.  Why do this if there is a paucity of material?  High demand raises prices, low demand lowers prices
http://agmetalminer.com/2010/02/12/lme-rent-increases-could-prompt-flood-of-metal-taken-off-market/

Good overview of Copper fundamentals
http://www.wildebeests.net/2010/03/02/investing-in-copper-what-you-need-to-know/

Commodities as a financial asset.  While the article is about Aluminum the same mechanism is under way in copper, oil, etc.
http://seekingalpha.com/article/190993-a-slow-motion-cornering-of-global-commodities-markets


From March 2,  2010 Fast Money
The folks on the desk suddenly noticed copper inventories in China surging.  I'll have more on this later but the trend has reversed declining and is starting to work back up again . . .  Copper discussion starts around 5:25 and goes to 10:40

Copper inventories going up in China. 

A good article and reference on cancelled warrants:
http://agmetalminer.com/2010/03/18/when-cancelled-copper-warrants-aren%e2%80%99t-what-they-seem/


Copper mine strike in Mexico deemed illegal, the cops may be brought in to bust the strike.
Mine is partially owned by Southern Copper, produced 166k tonnes in 2006
http://www.reuters.com/article/idUSN113373720100212
http://en.wikipedia.org/wiki/Cananea_mine#Economy

China tightening rules on home purchases

Recently China has tightened rules regarding home sales:

Banks can refuse loans on 3rd homes.  (wow, THIRD HOMES)
Down payments on second homes have been increased from 40 to 50 percent.
Mortgage rates have been increased.
Developers can no longer take deposits on unfinished homes without proper approval and other rules designed to mitigate keeping housing supply off the market.

China Daily article  2010 April 19

Bloomberg article 2010 April 20


Let's see if this works  . . .