Skip to comments.China to Buy $2 Billion Worth of US Mortgages
Posted on 08/17/2009 5:15:46 AM PDT by Ghost of Philip Marlowe
China Investment Corp, the country's $200 billion sovereign wealth fund, is set to pour up to $2 billion soon into the U.S. mortgage system by hiring mandates under the U.S. Treasury-backed Public-Private Investment Plan (PPIP), sources told Reuters.
(Excerpt) Read more at cnbc.com ...
Simplest answer? China sees real estate as the better investment.
I think your question is undermining your point. It would be precisely BECAUSE they think the economy is recovering that they would buy a riskier asset. Whether they are correct or not is another question.
Don’t know but I do recall the Japanese getting their fingers burned by buying US Real Estate. At the time they were viewed as ‘Inevitable’ and the sharpest minds on the Planet. Subsequent events proved this impression totally false.
It’s possible this is a replay.
These people can't run a lemonade stand, let alone the world's largest economy.
No, it is because when the dollar is destroyed, they will own something real.
At the beginning of the year, much of the very small uptick in real-estate sales in CA were from China buying foreclosed property.
They know our dollar is going to be worthless, so they are (de facto) buying our land cheap.
I believe the Japanese purchased mainly commercial real estate, which, by the way, is also about to go over the cliff, making the “subprime” loss look like pocket change.
The main point is that the ChiComs are purchasing real estate at the residential level. Not directly, but their “investment” may well end up being how they recover some of their losses by purchasing our debt.
Time for the usual reminder that the typical PPIP investment gets 6x or 14x leverage courtesy of taxpayers and savings account holders. That makes trash less trashy.
So they’re happy writing off the TRILLION dollars of UST debt they own, are still buying and have no apparent desire to sell?
It takes the ChiComs to bail out our DNC-led economic “experts.”
Re: Your final point. Think about them running government-rationed medical care with these same experts. Obammie the Commie tries to get up there and talk about health care like he was a pre-med student. But he thinks kids with asthma should be treated with a Breathalyzer.
Yup. You’re gambling that the real estate market recovers, and a portion of your bet is being played with the casino’s money.
Is the plan to move Chinese into these houses sometime in the future? I’m sure California houses and Oregon Washington State look great too. Establish a Chinese beachhead on the West Coast of the United State
Nothing the Chinese do is innocent or naive
As we learn from Thomas Sowell (and, Henry Hazlitt), when you analyze economics, you have to think beyond stage 1 and on to stage 2, stage 3...for as far along as you can.
Leftist economists only think at stage 1. E.g., raise minimum wage and the poorest workers will have more money. Done. They finish thinking. Intelligent and conservative economists think beyond and say, stage 1, employers give more money to low-skill task workers. Stage 2, they are only paying that low wage because that is all they can afford. They can't afford more, so, instead of paying more, they lay off some of those workers. So, unemployment rises. Stage 3, the low-skill workers who are still working and who may or may not receive an increase in pay, take on the work of those laid off. Eventually, they ask for more money for the additional work. If the employer can't afford it, they lose a necessary worker. If they can, their overhead increases and they can't hire new workers. So, either business owners end up paying more for the low-skilled workers and have less money either to save for hard times to pay for the workers they have and avoid more layoffs, or, they lose good workers and their operations suffer, they potentially lose business, etc.
So, you ask what is the ChiCom’s plan?
Ostensibly, to invest in something that has more “real” value than the linen we call the US dollar.
Beyond that (stage 2) who knows what their plan could be, but, like you, I never trust a communist. As you said, they are not innocent or naive and they certainly are not altruistic.
Whether their goal is to ex-patriot Chinese agents to live amongst us and take up jobs with access to sensitive information, or whether they plan to purchase enough land in select areas to manipulate mortgage values, I honestly don't know.
But I don't trust them. And I don't believe allowing one of our worst enemies to invest in residential real estate is any more intelligent than allowing them to manufacture our smart bombs.
Could the Left Coast end up as China's Sudetenland? (just askin')
They think that at minimum the West Coast should be Chinese. Vancouver and BC are already very very Chinese
With this big Chinese buy in foreclosed mortgages I'm sure they figure that somewhere down the road they can pressure a weakened United States to allow hundreds of thousands of Mainland Chinese families to move here (the West Coast mostly) and settle in them. PLUS no one child per family rule
So it is your contention that purchase of US debt through the Treasury and instead buying real estate at the residential level is the prudent investment at this time ?
I would just like to note that commodities are real assets.
The “value” as it relates to any particular fiat currency may fluctuate, but the asset remains intact.
If the future outlook for a currency is gloomy, holding debt denominated in such may not be the best idea. However if the outlook is for inflation, holding real assets would be prudent.
I think China may be hedging their position, if they start selling off notes their land holdings could moderate the loss they would incur in the remaining debt.
Chine sells notes = higher interest =lower land prices (more China buying) = more $ printed due to loss tax revenue ect .. = hyper inflation = long term win for China
China asset value intact and the evil western world in shambles.
Of course this is just the ramblings of a simple man on his first cup of coffee in the AM, so there is no warranty expressed or implied. Results not typical, ask your Doctor if this opinion is right for you.
PS .... whats up with the spell check ... anyone else notice ?
As I said, I don’t have evidence to back any “hunch” as to what their plan is.
The facts are, however, that they own a huge chunk of our debt. The administration that defaults on that will find China completely abandoning us and, at least, the BRIC nations demanding the world drop the US dollar as the reserve currency.
Because of that, the ChiComs will be able to call some pretty big shots going forward.
Here is an article from Mish, a good economic eye, that helps put our current mortgage situation in focus:
Mortgage Facts and Figures - Select States
* California has $2.4 trillion in mortgages debt. 42.0% of the properties have negative equity.
* Florida has $923 billion in mortgage debt. 49.4% of the properties have negative equity.
* Illinois has $447 billion in mortgage debt. 29.4% of the properties have negative equity.
* Arizona has $298 billion in mortgage debt. 51.0% of the properties have negative equity.
* Nevada has $149 billion in mortgage debt. 65.6% of the properties have negative equity.
* Nationwide there is $10.1 trillion in mortgage debt. 32.2% of the properties have negative equity.37.6% of the properties have “near-negative” equity.
32-37% Of All Mortgage Holders Are Stuck, Unable To Sell
This adds up to some incredible bargain-shopping for the ChiComs.
As I said, I have no hard evidence what their plan is, but my gut (and my head from my studies of communism) tell me that they do want as much real estate along the west coast as possible and that when it comes time to pay them back for their other investments and we are unable, they will demand we lift some immigration laws to allow them to expatriot large numbers.
But who knows. I was just posting this in the “not a great idea for our future” category.
You have fleshed it out completely
Plus if the USA has a grand recovery and gets stronger then their real estate investments do great and they sell in the future at great profit
So the ChiComs win no matter what
Lets pay attention and see if they buy more such investments
LOL. The good news; if only 5% of those who were unconcious when they voted in 2008 realize that we have a turd in the punchbowl, we should be able to clean house.
Amnesty in 2010.
If they get amnesty, they can flip the bird at the 5% and even more of the DNC/Lib base (not the leftists, but the softer liberals), because they'll be able to replace that in-between voting bloc that put Obammie the Commie over the top.
Plus they'll have secure elections for years to come.
Looks like I will have to go back to school and learn Chinese
Step 1: Collect Underpants
Step 2: ?
Step 3: Profit!