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November 17, 2009 – Comments (25)

The Chinese must be desperate indeed if they're willing to buy the same pigs in the same pokes -- that is, buying the same lousy, opaque, risky mortgage-backed assets. First ya gets burned on the stuff bundled by the banks. Now you're going to buy the small and medium sized banks themselves? The ones that are setting up for massive waves of failure as commercial loans head south?

Chinese-US pact to "help" troubled US banks.

And here's another poser. Why are U.S. investors so hot to pour money into Chinese assets if the Chinese are looking to put their money elsewhere? Could it be that all those stories about overcapacity, overbuilding, and abysmal returns on capital are true? Would Chinese banks be looking to buy some of the most opaque, risky assets on Earth (and in the U.S.) if they weren't?

Sj

25 Comments – Post Your Own

#1) On November 17, 2009 at 11:36 AM, starbucks4ever (97.89) wrote:

I don't understand this urge to buy the worst excrements that America can offer. Why can't they just invest in S&P index like any normal American worker planning for retirement?

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#2) On November 17, 2009 at 11:41 AM, miteycasey (30.20) wrote:

Becuase someone has to prop them up and China has as much to lose as anyone outside the USA.

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#3) On November 17, 2009 at 11:46 AM, russiangambit (29.40) wrote:

Chinese love a bargain . They probably think they can get a bargin on the US banks comparing to what they ahve to pay at home for theirs.

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#4) On November 17, 2009 at 11:55 AM, Teacherman1 (28.84) wrote:

If they bought a controlling interest, and they are big enough, they might be willing to eat the losses just to get what could effectively turn out to be a branch in the U.S. market.

I think the problem with UCBH was that their position was too small.

If they are going to do it, they should insist on being able to have controlling interest. Then they could put in more capital (being assured that they were in charge), and grow it from there.

I don't think after the UCBH deal, they are going to just expect the Govt. to let them take over and merge it into them. That was probably their thought when they went in.

When I was in banking it was not uncommon to make a second mortgage loan of a valuable piece of Real Estate, if the first was small and you were willing to buy it out in the event of trouble.

JMO and worth exactly what I am charging for it. 

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#5) On November 17, 2009 at 2:33 PM, leohaas (31.21) wrote:

"Why are U.S. investors so hot to pour money into Chinese assets if the Chinese are looking to put their money elsewhere?"

Just another case of "the grass is always greener..."

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#6) On November 17, 2009 at 3:13 PM, TMFBent (99.80) wrote:

The grass is always greener where the BS is spread the thickest?

Sj

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#7) On November 17, 2009 at 3:15 PM, kdakota630 (29.76) wrote:

Like the Soundgarden song says, "the grass is always greener where the dogs are s**tting."

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#8) On November 17, 2009 at 3:44 PM, kirkydu (92.19) wrote:

maybe, just maybe, the Chinese and Americans are helping each other take over the 21st century and little gestures mean a lot. 

So many people forget the big picture.  Over 35 years ago the Chinese and Americans started working together.  Why?  Because with a population so big, we knew that China either needed to grow economically or risk war.  The whole things is bastardized now however and it's not such a mutual relationship.   What's next?  Well, after the Chinese spend their dollars buying American assets (the cheapest assets to buy with dollars) then the Chinese will let the Yuan gradually float to become stronger so the Chinese can buy cheaper commodities. 

This whole recession has been about repricing the world with the Chinese getting cheap assets, commodities and growth, and a few rich Americans getting richer.  Frankly, the more I learn and am able to analyze with hindsight, the more this all looks like the biggest screw job the world has ever seen.  A small handful of Americans sold out America, and now we will have to wait a decade or so to recover while we watch the Chinese buy assets here with our own money we have been handing them for years.  I hate to go all Alstry on you, but it was treason and there are a few thousand people who ought to be hanged.

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#9) On November 17, 2009 at 3:46 PM, kirkydu (92.19) wrote:

correction, the cheapest relatively safe and good long term assets.

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#10) On November 17, 2009 at 3:53 PM, TMFMarlowe (< 20) wrote:

Could it be that all those stories about overcapacity, overbuilding, and abysmal returns on capital are true?

Mmm-hmm. I'll be shocked if they aren't, actually. You saw Ambrose Evans-Pritchard's bit on this -- "overcapacity" as China's main export?

This spending spree reminds me a LOT of Japan's similar buying-up of US properties in the late 1980s. They were going to own the world, remember? I'm inclined to think this'll work out the same way.

- John Rosevear

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#11) On November 17, 2009 at 3:55 PM, Gemini846 (46.06) wrote:

Few thousand or the Millions and Millions who shop at walmart (China's 8th largest trading partner)? Think about who's really selling out.

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#12) On November 17, 2009 at 3:59 PM, kirkydu (92.19) wrote:

Overcapacity my butt.  They will simply start consuming their own goods to keep from having a civil war.  They will subsidize with their massive foriegn currency reserves.  If the Chinese get tired of buying American assets they can simply let the Yuan float earlier than later and for awhile drive the price of their imported commodities down and buy African and South American assets.  The Chinese are clearly out thinking us right now.  When will people realize they have been sold out by a few thousand execs and "investors" and demand retribution?  This recession will last a decade because we are broke and there is nobody out there willing to buy what we produce precisely because they have their own capacity.

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#13) On November 17, 2009 at 4:01 PM, kirkydu (92.19) wrote:

Gemini stop drinking the kool-aid.  People shop at Walmart because they can't afford anymore to shop elsewhere due to their household income being skimmed down to subsitance levels by Wall Street, DC, the banksters and board buddy execs. 

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#14) On November 17, 2009 at 4:17 PM, kirkydu (92.19) wrote:

I did a seminar a few weeks ago this is what I did.  I wrote $700 Billion on the dry erase board and asked what it was.

A few people said TARP.  I said, "hmmmm, that's right, but now what I was going for.  That happens to be about what Wall Street bonuses were from 2000-2007.  What a strange coincidence don't you think."

Here's another good line, "Stop going for the easy buck and start producing something with your life. Create, instead of living off the buying and selling of others."

I'm buying a farm, what are you going to do? 

 

 

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#15) On November 17, 2009 at 4:46 PM, Turfscape (42.48) wrote:

Kirkydu said:
"People shop at Walmart because they can't afford anymore to shop elsewhere due to their household income being skimmed down to subsitance levels by Wall Street, DC, the banksters and board buddy execs."

Because people at Wal-mart are only buying milk, toilet paper and socks in order to survive. Nobody is buying flat screen TVs there...or game systems...or other non-necessities.

Funny thing, I can get better value at a farm market for fresh ground beef than I can at Wal-mart (higher quality meat, same price). I can get a better price on fresh corn at that same farm market than I can at Wal-mart. I'm thinking that might just present a small hole in your theory...

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#16) On November 17, 2009 at 4:58 PM, leohaas (31.21) wrote:

People shop at Walmart to buy cheap sh!t. Whenever I need cheap sh!t, I go to Walmart, even though I can afford more expensive stuff.

The Chinese will not float their money. Their economy is based on making cheap sh!t. If the Yuan goes up, their sh!t becomes more expensive, and we stop buying it. In addition, they have too many dollars to afford the Yuan going up.

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#17) On November 17, 2009 at 4:59 PM, russiangambit (29.40) wrote:

> Funny thing, I can get better value at a farm market for fresh ground beef than I can at Wal-mart (higher quality meat, same price). I can get a better price on fresh corn at that same farm market than I can at Wal-mart. I'm thinking that might just present a small hole in your theory...

Right, I am going to drive 30 miles to the closest farm market and spend 30% more than I would at Wal-Mart. May be farm markets are different but the ones I've been are not cheaper than Wal-Mart. I will agree that the quality is probably higher, but they are pretty expensive anyway (especially, after adding the gas and time spent getting there) and there is no way a farm market can supply a city the size of Houston. You know you can buy organic milk, eggs and veggies at Wal-Mart too.

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#18) On November 17, 2009 at 5:03 PM, GNUBEE (24.25) wrote:

This spending spree reminds me a LOT of Japan's similar buying-up of US properties in the late 1980s. They were going to own the world, remember? I'm inclined to think this'll work out the same way.

Yep, and the US will benefit. Remember Rockafeller Center?

How much debt were we able evaporate through Mitsubishi? 

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#19) On November 17, 2009 at 5:13 PM, Turfscape (42.48) wrote:

russiangambit said:
"Right, I am going to drive 30 miles to the closest farm market and spend 30% more than I would at Wal-Mart. May be farm markets are different but the ones I've been are not cheaper than Wal-Mart."

Wow...very glad I don't live in Houston! I have a choice of farm markets in a 3-5 mile radius and prices (depending on season and seller) are very, very competitive.

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#20) On November 17, 2009 at 5:34 PM, davejh23 (< 20) wrote:

"Wow...very glad I don't live in Houston! I have a choice of farm markets in a 3-5 mile radius and prices (depending on season and seller) are very, very competitive."

I have several markets nearby, but prices are MUCH higher than the grocery stores...like 300% higher.  Also, towards the end of the local harvest, quality is inferior.

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#21) On November 18, 2009 at 1:34 AM, whereaminow (< 20) wrote:

People shop at Walmart because the prices are cheaper. They value cheap prices over being in a store that is not a cross between a Kid Rock video, Harlem, Palestine, and Bangladesh.

Nothing wrong with that.  WalMart doesn't make you fat and stupid. Your diet does.

As far as this post, I thought it was about regulations (same junk) and liberals (same sucker multiple times), but then again it could have been about terrorists (same junk) and Republicans (same sucker).  Well, at least it wasn't about free markets (same junk) and Paultards :)

David in Qatar

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#22) On November 18, 2009 at 2:45 AM, DarthMaul09 (29.79) wrote:

Maybe China is interested in the properties that are going to be repossess when all the bad loans default.  In effect they are not buying US banks, they are buying a diversified real estate portfolio.  Converting their risky US dollars for hard US assets.

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#23) On November 18, 2009 at 9:22 AM, hhasia (63.24) wrote:

I guess they do not teach Marxism in US schools.  The"bank" pact is classic Marxism.  No need for invasion, the west will sell you the rope to hang them with.  It is the greed of the west that is its downfall.

What was the other side of the "pact"? Technology. The west had to give out something of value, not just real esate. So not only does another country gain control of the sovereign dirt, but the technology to conduct covert activites from said dirt.

The Chinese are artists at miss-direction. So who is the sucker here? The west would not even come close to that much in-roads on the sovereign dirt of China.

HHASIA

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#24) On November 21, 2009 at 12:45 AM, DarthMaul09 (29.79) wrote:

EWBC is a company to watch or speculate on.  I bet against them with the idea that California's financial troubles would take down the bank.  But EWBC recent stock rise suggests that someone (China) may be buying a stake in the bank.  If that is true, my bet will remain a big loser.  China has deep pockets and a long time horizon.  If they are interested in obtaining California real estate, this would be a great buy, assuming that you had enough money to keep the bank out of the hands of the FDIC.

 

East West Bancorp, Inc. (East West) is a bank holding company that offers a range of banking services to individuals and small to mid-size businesses through its subsidiary bank, East West Bank (East West Bank or the Bank) and its subsidiaries. The Bank provides loans for commercial, construction and residential real estate projects and for the financing of international trade for companies primarily in California. The Company has four principal operating segments: retail banking, commercial lending, treasury and residential lending. The Bank markets its services in the Los Angeles metropolitan area, Orange County, San Bernardino County, and the greater San Francisco Bay area, including San Mateo County, the Silicon Valley area of Santa Clara County, and Alameda County. As of December 31, 2008, the Bank had three wholly owned subsidiaries: E-W Services, Inc., East-West Investments, Inc., and East West Mortgage Securities, LLC.

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#25) On November 21, 2009 at 1:08 PM, Teacherman1 (28.84) wrote:

Darth - I think the big rise in their stock price was because they just doubled in size, and the Govt. is taking most of the risk.

They will be able to "feed" off of the assets from UCBH and grow from there.

If it drops back down some, I will buy.

I want to watch and wait because the merger of those two banks, rather than letting the Chinese bank that had a fairly large investment in them, buy it, could just be a case of putting them in the same basket so they could keep an eye on both.

I don't believe this is what happened, but you never know.

JMO and worth exactly what I am charging for it.

Have a nice weekend everyone. 

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