Jump to content
House Price Crash Forum
Sign in to follow this  
LuckyOne

The Anatomy Of A Trade Surplus .....

Recommended Posts

There has been quite a bit of chat here about how foreign investors, especially from trade surplus countries, are buying up London properties and propping up the market.

I have thought about what happened to Japanese investors in the 1980s and how things ended for them. I know that history doesn't repeat exactly but it often rhymes (I can't remember who said it first).

I think that we can take some comfort from what happened to the Japanese trade surplus in the 1980s :

1. A trade surplus builds.

2. The trade surplus is invested in the bonds of the deficit nation.

3. The surplus nation becomes uncomfortable with the paper assets it owns and begins to buy physical assets in the deficit nation from the local population.

4. This drives up the prices of physical assets in the deficit nation.

5. Eventually the buying frenzy ends, usually with a final orgy of large, massively over priced acquisitions and demand is sated.

6. Once the frenzy is over, asset prices collapse in the deficit nation.

7. The local population quietly buys back the physical assets in the deficit nation at much lower prices.

8. Part of the transfer of wealth caused by the trade imbalances are reversed as the locals sell high and buy low.

We are somewhere between stages 4 and 5 in my view.

The top will be reached when a lot of "trophy" assets are acquired by investors in surplus countries at ridiculous prices. In the 1980s, the assets were the Pebble Beach golf course and the Rockerfeller Centre.

Share this post


Link to post
Share on other sites

The market is past 6, the government is at 2

I am not sure that I agree with that. If we look at the overseas acquisitions (and attempted acquisitions) by government sponsored entities in China, it is pretty obvious that they are also well down the path of trying to replace paper assets with physical assets.

There are obviously non-financial considerations for them as well such as securing the supply of resources etc.

The only question in my mind is whether they are starting to pay too much for the physical assets that they acquire.

Share this post


Link to post
Share on other sites

I am not sure that I agree with that. If we look at the overseas acquisitions (and attempted acquisitions) by government sponsored entities in China, it is pretty obvious that they are also well down the path of trying to replace paper assets with physical assets.

There are obviously non-financial considerations for them as well such as securing the supply of resources etc.

The only question in my mind is whether they are starting to pay too much for the physical assets that they acquire.

If most of those physical assets are not status symbols in the old-rich nations but rather useful and productive things, it seems unlikely they're overpaying extravagently. It's russians and 'merkins who are buying up worthless crap like football clubs.

Unless you have evidence to the contrary?

Share this post


Link to post
Share on other sites

If most of those physical assets are not status symbols in the old-rich nations but rather useful and productive things, it seems unlikely they're overpaying extravagently. It's russians and 'merkins who are buying up worthless crap like football clubs.

Unless you have evidence to the contrary?

http://www.thisislondon.co.uk/standard-business/article-23901559-red-army-of-buyers-keeps-uk-landlords-in-the-black.do

From this thread ......

http://www.housepricecrash.co.uk/forum/index.php?showtopic=155241&st=0

I probably left out a step where the buying shifts from productive assets to "vanity" or "trophy" assets.

I think that Gucci, Prada, LV, Mercedes, high end drinks makers etc are also benefitting massively from the acquisition of status symbols in China.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.