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Daily Archives: March 18, 2014

Another Escalation: US Freezes Diplomatic Relations With Syria, Orders Non-US Personnel To Leave Country | Zero Hedge

Another Escalation: US Freezes Diplomatic Relations With Syria, Orders Non-US Personnel To Leave Country | Zero Hedge.

Putin 2 – Obama 0, which means it is time to go back to the one place where it all started last year, and where Putin had his most resounding victory over the US foreign policy apparatus (at least until the Ukraine, where we trampled not only over Obama’s red line… again… but where nobody quite explained the “costs” to the ex-KGB leader): Syria.  Sure enough, with the US unable to respond in Crimea, has decided to take its fight back to where Europe’s natgas reliance on Gazprom product was first truly exposed.

BREAKING: US freezes diplomatic, consular relations with Syria; Orders non-US personnel to leave country.

— The Associated Press (@AP) March 18, 2014

The US can order non-US personnel around? More from Reuters:

  • U.S.
    IMMEDIATELY SUSPENDS OPERATIONS OF SYRIAN EMBASSY IN WASHINGTON, AS
    WELL AS HONORARY CONSULATES IN MICHIGAN AND TEXAS – STATE DEPARTMENT
  • U.S.
    SPECIAL ENVOY FOR SYRIA SAYS ‘UNACCEPTABLE’ FOR INDIVIDUALS APPOINTED
    BY ASSAD REGIME TO CONDUCT DIPLOMATIC, CONSULAR OPERATIONS IN U.S.

Regardless, if the bloodless Russian annexation of Crimea wasn’t enough to push the S&P to new all time highs, this surely will.

The True Cost of Asparagus | CUESA

The True Cost of Asparagus | CUESA.

MARCH 14, 2014

The True Cost of Asparagus

The first tender spears of asparagus are always a welcome sight at the farmers market, a sign that spring is on its way. But some of that seasonal excitement is fading, now that bunches can be found on grocery store shelves throughout the winter.

“Asparagus has become available year round, whereas before it was just a springtime crop in the United States,” says Roscoe Zuckerman of Zuckerman’s Farm, whose asparagus season typically runs about 16 weeks, from February through May.

The recent influx of Mexican asparagus has farmers like Roscoe worried about the future. A fourth-generation asparagus and potato grower in Stockton, he farms about 260 acres of asparagus, a number that has been decreasing over the years as the wholesale market has shifted. He grandfather once grew 4,500 acres of green and white spears.

On the shelf, imported asparagus may be as cheap as $2 a pound. At such prices, it’s nearly impossible for domestic growers to break even. “Mexican asparagus is being bought wholesale at around $0.64 a pound,” Roscoe says. “My cost this time of year is about $1.03 a pound for harvesting and packing, and that’s without growing costs.”

Because the costs of harvest are so high, he has been cutting his losses by doing something no farmer wants to do: disking viable crop, which means cutting spears and leaving them in the field. “How can you grow a crop and not be able to sell it?” he laments.

Loss of Market Share

Asparagus was first planted in California in the 1850s in the fertile Sacramento-San Joaquin River Delta, and the state still leads the nation in asparagus production. But acreage has been in decline in recent years. According to the National Agricultural Statistics Service, there were 12,000 acres of asparagus in 2012, down from 29,000 in 2003.

“The asparagus industry in our area is dying a slow death,” says Roscoe.

Over the last two decades, free trade agreements like NAFTA have contributed to this shift,dramatically changing what’s on the American plate. The glut of imports has created a year-round expectation for cheap asparagus, tomatoes, raspberries, and other seasonal crops.

While global trade seems like a win in terms of food availability and access, particularly in colder parts of the US, the elimination of tariffs means that wholesale prices have fallen, making it difficult for US growers to compete with countries like Mexico and Peru. Today, more and more Americans are eating asparagus, but it is estimated that imports make up as much as90 percent of the market.

Food of the Kings

Though it is referred to in the industry simply at “grass,” asparagus has historically been considered an aristocrat of the plant kingdom, commanding higher prices than most vegetables. Few consumers understand the patience and hard work that go into growing this unusual perennial crop.

Planting asparagus “crowns” is a significant time investment for farmers, as new plants must establish themselves for two or three years in the ground before producing harvestable shoots. Once mature, the plants may be harvested for up to 20 years, but only about half a pound of spears may be picked from each plant over the course of a season.

It’s a demanding plant that requires vigilant attention from growers. “Asparagus is temperature- and light-driven,” Roscoe explains. “For example, during a full moon, you have water that’s coming up in the soil, which gives the plants more oomph. You’ve also got light from the moon, so production usually spikes.”

On hot days, asparagus can grow upwards of 7 inches a day, which means that Roscoe may be sending workers out into the field to harvest from the same plants within 18 to 24 hours.

Fair Share for Labor

Harvesting asparagus is one of the more labor-intensive jobs in agriculture. Roscoe estimates that every spear is touched by human hands about 20 times from field to market, as it is cut, picked up, passed down rows, put in piles, and eventually sorted by size in the packing shed. Thick shoots come from younger, stronger plants, while the thin shoots are from older plants.

Second-generation farmer Thaddeus Barsotti ofCapay Organic, which grows 60 acres of organic asparagus for direct sales as well as wholesale markets, estimates that his asparagus harvest costs are 30 to 50% of the total production cost.

A discrepancy in labor standards is a significant factor in the higher price of locally grown asparagus. Zuckerman’s conventionally grown asparagus sells for $3.50 a bunch at the farmers market, while Capay’s organic asparagus is $5.

“In California, we’re required to pay minimum wage and we have Cal/OSHA responsibilities,” explains Thaddeus. “These things are important, and they are also expensive.” According to Roscoe, a Mexican laborer gets paid $10 a day.

Taking “Stalk” in Direct Markets

In a depressed wholesale asparagus market, both Zuckerman’s Farm and Capay Organic rely heavily on farmers markets and CSAs to keep their sales afloat. “The only business that I can make money at is farmers markets, which includes restaurant trade,” says Roscoe. He estimates that farmers markets make up half of his business.

Farmers markets also offer the opportunity to communicate the freshness of a locally grown product that is harvested the day before market, in contrast to asparagus that has traveled thousands of miles and may be a week old before it hits market shelves.

Direct channels also allow farmers to talk about the true costs of their product. Thaddeus notes, “I think free trade has its place, but it can make things difficult for local ag producers, because when a product comes across the border, people don’t know the story behind it.”

“That’s what’s cool about farmers markets, CSAs, and any direct connection farms can have with the consumer,” he continues. “People are willing to pay fair prices for fair food.”

Support Zuckerman’s Farm on Saturday, Tuesday, and Thursday and Capay Organic on Saturday at the Ferry Plaza Farmers Market.

See for yourself how Zuckerman’s asparagus is grown and harvested on our next farm tour on April 13. Buy tickets now.

Roscoe Zuckerman photo by Tory Putnam. Thaddeus Barsotti photo courtesy of Capay Organic.

The True Cost of Asparagus | CUESA

The True Cost of Asparagus | CUESA.

MARCH 14, 2014

The True Cost of Asparagus

The first tender spears of asparagus are always a welcome sight at the farmers market, a sign that spring is on its way. But some of that seasonal excitement is fading, now that bunches can be found on grocery store shelves throughout the winter.

“Asparagus has become available year round, whereas before it was just a springtime crop in the United States,” says Roscoe Zuckerman of Zuckerman’s Farm, whose asparagus season typically runs about 16 weeks, from February through May.

The recent influx of Mexican asparagus has farmers like Roscoe worried about the future. A fourth-generation asparagus and potato grower in Stockton, he farms about 260 acres of asparagus, a number that has been decreasing over the years as the wholesale market has shifted. He grandfather once grew 4,500 acres of green and white spears.

On the shelf, imported asparagus may be as cheap as $2 a pound. At such prices, it’s nearly impossible for domestic growers to break even. “Mexican asparagus is being bought wholesale at around $0.64 a pound,” Roscoe says. “My cost this time of year is about $1.03 a pound for harvesting and packing, and that’s without growing costs.”

Because the costs of harvest are so high, he has been cutting his losses by doing something no farmer wants to do: disking viable crop, which means cutting spears and leaving them in the field. “How can you grow a crop and not be able to sell it?” he laments.

Loss of Market Share

Asparagus was first planted in California in the 1850s in the fertile Sacramento-San Joaquin River Delta, and the state still leads the nation in asparagus production. But acreage has been in decline in recent years. According to the National Agricultural Statistics Service, there were 12,000 acres of asparagus in 2012, down from 29,000 in 2003.

“The asparagus industry in our area is dying a slow death,” says Roscoe.

Over the last two decades, free trade agreements like NAFTA have contributed to this shift,dramatically changing what’s on the American plate. The glut of imports has created a year-round expectation for cheap asparagus, tomatoes, raspberries, and other seasonal crops.

While global trade seems like a win in terms of food availability and access, particularly in colder parts of the US, the elimination of tariffs means that wholesale prices have fallen, making it difficult for US growers to compete with countries like Mexico and Peru. Today, more and more Americans are eating asparagus, but it is estimated that imports make up as much as90 percent of the market.

Food of the Kings

Though it is referred to in the industry simply at “grass,” asparagus has historically been considered an aristocrat of the plant kingdom, commanding higher prices than most vegetables. Few consumers understand the patience and hard work that go into growing this unusual perennial crop.

Planting asparagus “crowns” is a significant time investment for farmers, as new plants must establish themselves for two or three years in the ground before producing harvestable shoots. Once mature, the plants may be harvested for up to 20 years, but only about half a pound of spears may be picked from each plant over the course of a season.

It’s a demanding plant that requires vigilant attention from growers. “Asparagus is temperature- and light-driven,” Roscoe explains. “For example, during a full moon, you have water that’s coming up in the soil, which gives the plants more oomph. You’ve also got light from the moon, so production usually spikes.”

On hot days, asparagus can grow upwards of 7 inches a day, which means that Roscoe may be sending workers out into the field to harvest from the same plants within 18 to 24 hours.

Fair Share for Labor

Harvesting asparagus is one of the more labor-intensive jobs in agriculture. Roscoe estimates that every spear is touched by human hands about 20 times from field to market, as it is cut, picked up, passed down rows, put in piles, and eventually sorted by size in the packing shed. Thick shoots come from younger, stronger plants, while the thin shoots are from older plants.

Second-generation farmer Thaddeus Barsotti ofCapay Organic, which grows 60 acres of organic asparagus for direct sales as well as wholesale markets, estimates that his asparagus harvest costs are 30 to 50% of the total production cost.

A discrepancy in labor standards is a significant factor in the higher price of locally grown asparagus. Zuckerman’s conventionally grown asparagus sells for $3.50 a bunch at the farmers market, while Capay’s organic asparagus is $5.

“In California, we’re required to pay minimum wage and we have Cal/OSHA responsibilities,” explains Thaddeus. “These things are important, and they are also expensive.” According to Roscoe, a Mexican laborer gets paid $10 a day.

Taking “Stalk” in Direct Markets

In a depressed wholesale asparagus market, both Zuckerman’s Farm and Capay Organic rely heavily on farmers markets and CSAs to keep their sales afloat. “The only business that I can make money at is farmers markets, which includes restaurant trade,” says Roscoe. He estimates that farmers markets make up half of his business.

Farmers markets also offer the opportunity to communicate the freshness of a locally grown product that is harvested the day before market, in contrast to asparagus that has traveled thousands of miles and may be a week old before it hits market shelves.

Direct channels also allow farmers to talk about the true costs of their product. Thaddeus notes, “I think free trade has its place, but it can make things difficult for local ag producers, because when a product comes across the border, people don’t know the story behind it.”

“That’s what’s cool about farmers markets, CSAs, and any direct connection farms can have with the consumer,” he continues. “People are willing to pay fair prices for fair food.”

Support Zuckerman’s Farm on Saturday, Tuesday, and Thursday and Capay Organic on Saturday at the Ferry Plaza Farmers Market.

See for yourself how Zuckerman’s asparagus is grown and harvested on our next farm tour on April 13. Buy tickets now.

Roscoe Zuckerman photo by Tory Putnam. Thaddeus Barsotti photo courtesy of Capay Organic.

Russian Forces Attack Simferopol Military Unit; 1 Injured, According To Reports | Zero Hedge

Russian Forces Attack Simferopol Military Unit; 1 Injured, According To Reports | Zero Hedge.

It seems, despite all the market’s belief that Putin would go quietly into the night once more, that the situation is escalating:

  • *GUNMEN STORM UKRAINE ARMY INSTALLATIONS IN CRIMEA: UKRAINE DEFMIN SELEZNYOV
  • *GUNMEN STORMING CRIMEA BUILDINGS SHOOTING IN AIR: SELEZNYOV
  • *UKRAINIAN OFFICER WOUNDED BY LIVE AMMUNITION, HAYDUK SAYS
  • *ATTACKS ON UKRAINIAN UNITS INCREASING: NAVY CHIEF HAYDUK

Of course, the big question now is how will Ukraine respond? Because attacking (and injuring) citizens sure seems like a red-line someone should not be crossing (although, as per the referendum, that region is now Russian).

#Crimean unit under attack is the photogrammetric center of the Chief Directorate of Operational Support of the Armed Forces of #Ukraine |PR

— Euromaidan PR (@EuromaidanPR) March 18, 2014

BREAKING #Ukrainian military unit in #Simferopol under attack. #Russian snipers on the scene, one injured! -D.Tymchuk |PR News #Crimea

— Euromaidan PR (@EuromaidanPR) March 18, 2014

Of course there is no confirmation that these are “Russian” troops per se but it is on the heels of news (via Slashdot) that:

this excerpt from The Examiner: “The Security Service of Ukraine (SBU) confirmed March 16 the arrest of a group of Russians in the Zaporizhzhia (Zaporozhye) region of Ukraine. The men were armed with firearms, explosives and unspecified ‘special technical means’. This follows the March 14 arrest … of several Russians dressed black uniforms with no insignia, armed with AKS-74 assault rifles and in possession of numerous ID cards under various names. One of which was an ID card of Military Intelligence Directorate of the Russian armed forces; commonly known as ‘Spetsnaz’.

And the response by Ukraine has to be weighed based on this statement from the PM:

  • *UKRAINE WON’T RECOGNIZE CRIMEA ANNEXATION, TURCHYNOV SAYS
  • *UKRAINE SEEKS TO AVOID CRIMEA ESCALATION, HAYDUK SAYS
  • *RUSSIAN TROOPS BLOCKING 38 UKRAINE UNITS IN CRIMEA, HAYDUK SAYS

Russian Forces Attack Simferopol Military Unit; 1 Injured, According To Reports | Zero Hedge

Russian Forces Attack Simferopol Military Unit; 1 Injured, According To Reports | Zero Hedge.

It seems, despite all the market’s belief that Putin would go quietly into the night once more, that the situation is escalating:

  • *GUNMEN STORM UKRAINE ARMY INSTALLATIONS IN CRIMEA: UKRAINE DEFMIN SELEZNYOV
  • *GUNMEN STORMING CRIMEA BUILDINGS SHOOTING IN AIR: SELEZNYOV
  • *UKRAINIAN OFFICER WOUNDED BY LIVE AMMUNITION, HAYDUK SAYS
  • *ATTACKS ON UKRAINIAN UNITS INCREASING: NAVY CHIEF HAYDUK

Of course, the big question now is how will Ukraine respond? Because attacking (and injuring) citizens sure seems like a red-line someone should not be crossing (although, as per the referendum, that region is now Russian).

#Crimean unit under attack is the photogrammetric center of the Chief Directorate of Operational Support of the Armed Forces of #Ukraine |PR

— Euromaidan PR (@EuromaidanPR) March 18, 2014

BREAKING #Ukrainian military unit in #Simferopol under attack. #Russian snipers on the scene, one injured! -D.Tymchuk |PR News #Crimea

— Euromaidan PR (@EuromaidanPR) March 18, 2014

Of course there is no confirmation that these are “Russian” troops per se but it is on the heels of news (via Slashdot) that:

this excerpt from The Examiner: “The Security Service of Ukraine (SBU) confirmed March 16 the arrest of a group of Russians in the Zaporizhzhia (Zaporozhye) region of Ukraine. The men were armed with firearms, explosives and unspecified ‘special technical means’. This follows the March 14 arrest … of several Russians dressed black uniforms with no insignia, armed with AKS-74 assault rifles and in possession of numerous ID cards under various names. One of which was an ID card of Military Intelligence Directorate of the Russian armed forces; commonly known as ‘Spetsnaz’.

And the response by Ukraine has to be weighed based on this statement from the PM:

  • *UKRAINE WON’T RECOGNIZE CRIMEA ANNEXATION, TURCHYNOV SAYS
  • *UKRAINE SEEKS TO AVOID CRIMEA ESCALATION, HAYDUK SAYS
  • *RUSSIAN TROOPS BLOCKING 38 UKRAINE UNITS IN CRIMEA, HAYDUK SAYS

PBOC Denies It Will Bail Out Collapsed Real Estate Developer While Chinese Property Developer Market Crashes | Zero Hedge

PBOC Denies It Will Bail Out Collapsed Real Estate Developer While Chinese Property Developer Market Crashes | Zero Hedge.

 

In yesterday’s most underreported story, which we noted first thing yesterday morning, China is on the verge of a second bond default just weeks after Solar cell maker, Chaori Solar, defaulted earlier this month, this time Zhejiang Xingrun (appropriately abbreviated ZX): a real-estate developer which just collapsed after its largest shareholder was arrested and which has some CNY3.5 billion in debt and furthermore the company was revealed to have been taking deposits from individuals offering interest rate between 18% and 36%.

 

But while Chaori was left to crash and burn, ZX may need a bailout for the same reason that we have always said China is desperate to keep kicking the can for as long as possible: any glimpse under the hood will reveal the true Chinese credit bubble nightmares, best summarized in the following: CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.” Which is why overnight the FT reported that none other than the PBOC was scrambling to bail out the lender in order to avoid the inevitable liquidation avalanche that will begin as soon as the realization hits just how far China’s non-existent collateral is stretched out.

 

From the FT:

Officials from the government of Fenghua, a town in eastern China with a population of about 500,000, the People’s Bank of China and China Construction Bank, which was the main lender to the developer, were on Tuesday thrashing out ways to repay the company’s Rmb3.5bn ($566m) of debt.

 

Not surprisingly, local government officials were keen to downplay Xingrun’s fate, which quickly added fuel to jittery markets after Chaori defaulted previously. The “situation is not that serious yet”, said a Fenghua local government official to the FT who only gave her surname Wu. Failure of a small property developer is not unusual in China or even in Zhejiang Province, where Xingrun is based. Well, it is if people start asking questions.

 

One can see why the local governments and administrators are eager to downplay the potential impact. As Bloomberg reported overnight, “some 66 percent of new Chinese developer dollar-denominated bonds sold this year are trading below their issue price amid the collapse of a private real estate company and news the housing market is cooling.” In other words, the Chinese housing market is suddenly the perfect receptacle for a lit default match to lead to an all out panic.

 

About $6.3 billion of notes in the U.S. currency sold by property companies including Guangzhou R&F Properties Co., KWG Property Holding Ltd. and Shimao Property Holdings Ltd. (813) have fallen in secondary market trade, according to data compiled by Bloomberg. Prices on Kaisa Group Holdings Ltd. (1638)’s 2018 8.875 percent debentures dropped to a seven-month low yesterday while Shimao Property’s $600 million of 8.125 percent notes due 2021 and sold to investors at par in January were trading at 97.646 cents on the dollar.

 

Demand for developer debt is waning after government officials familiar with the matter said yesterday Zhejiang Xingrun Real Estate Co. doesn’t have enough cash to repay 3.5 billion yuan ($566 million) of debt. The value of home sales in the world’s second-biggest economy fell 5 percent in the first two months of the year after local governments stepped up measures to curb rising prices. The 7.5 percent economic expansion targeted by China this year would be the slowest since 1990.

 

We’re cautious on property bonds short term, with the developers expected to report weaker year-on-year monthly sales data for March,” said Owen Gallimore, a Singapore-based credit analyst at Australia & New Zealand Banking Group Ltd. “For the majority of high yield property developers, January and February sales fell as tier three and four cities suffered from over supply and the smaller developers faced a credit squeeze.”

 

In other words, not only is the primary market frozen, but the secondary market is crashing further adding to the reflexive fuel that could be precisely the catalyst that unwinds the entire Chinese credit bubble:

 

China Resources Land Ltd. was the last company from China and Hong Kong to sell dollar debentures in Asia, adding $50 million to its existing 4.375 percent bonds due February 2019 on March 13.

 

The collapse in secondary prices comes less than two weeks after Shanghai Chaori Solar Energy Science & Technology Co. became the first company in China to default on its onshore corporate bonds.

 

All of this is happening as China is doing all it can (and has been for the past two years, without success) to cool its red hot housing market bubble, which unlike the US where the bubble is in the stock market, in China it is all about housing:

 

At least 10 Chinese cities stepped up measures to cool local property markets at the end of last year with Shenzhen, Shanghai and Guangzhou raising the minimum down payments for second homes to 70 percent from 60 percent.

 

New-home price growth slowed last month led by Beijing, Shenzhen, Shanghai and Guangzhou, the four cities the government defines as first tier, the National Bureau of Statistics said today. Prices in Beijing and Shenzhen each rose 0.2 percent in February from a month earlier while they added 0.4 percent in Shanghai, the smallest increase since November 2012, and gained 0.5 percent in Guangzhou. Prices advanced in 57 of the 70 cities the government tracks, versus 62 in January.

 

Visually:

 

 

So all of the above would suggest the FT’s account of an imminent, if quiet, bailout of ZX is true. Turns out isn’t, and in fact the PBOC was so pissed it took to its Weibo microblog site to explain what really happened. As Bloomberg summarized, the Chinese central bank says it didn’t participate in an “emergency meeting held Tuesday” to discuss Zhejiang Xingrun Real Estate as reported by some unidentified media  according to a statement posted on PBOC’s official microblog account. PBOC is not involved in dealing with risks from the developer, according to the statement.

 

For the purists, here is the official statement via Weibo:

 

[Condemned individual foreign media untrue] March 18, individual foreign media reports, “China’s central bank to discuss emergency aid small real estate company,” inconsistent with the facts: First, the People’s Bank did not participate in the text referred to “convene an emergency meeting on Tuesday.” . Second, the People’s Bank of Zhejiang Xingrun not involved in the disposition of property-related risks. False reports to the media release behavior in unverified cases, the People’s Bank strongly condemned.

 

Well, it was google-translated, but the gist is clear.

 

So which is it: will China really let ZX fail and allow the second bond default in under a month to further slam the secondary bond (and much less relevant equity) market, while grinding the all important primary issuance market to a halt at precisely the time when credit creation in China is absolutely critical, or will the PBOC have been exposed as a liar once again.

 

Since the PBOC is merely a central bank, and thus lying is its bread and butter, our money is on the former, but one can only hope that in a world in which the Bernanke global put is now ubiquitous and perpetual, and the only investment calculus depends on the return/return analysis, that it will be “communist” China that finally allows risk back into the global investment equation.

 

And finally, putting it all into perspective, is our favorite chart showing bank asset creation in China and the US over the past five years. It needs no commentary.

 

 

PBOC Denies It Will Bail Out Collapsed Real Estate Developer While Chinese Property Developer Market Crashes | Zero Hedge

PBOC Denies It Will Bail Out Collapsed Real Estate Developer While Chinese Property Developer Market Crashes | Zero Hedge.

 

In yesterday’s most underreported story, which we noted first thing yesterday morning, China is on the verge of a second bond default just weeks after Solar cell maker, Chaori Solar, defaulted earlier this month, this time Zhejiang Xingrun (appropriately abbreviated ZX): a real-estate developer which just collapsed after its largest shareholder was arrested and which has some CNY3.5 billion in debt and furthermore the company was revealed to have been taking deposits from individuals offering interest rate between 18% and 36%.

 

But while Chaori was left to crash and burn, ZX may need a bailout for the same reason that we have always said China is desperate to keep kicking the can for as long as possible: any glimpse under the hood will reveal the true Chinese credit bubble nightmares, best summarized in the following: CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.” Which is why overnight the FT reported that none other than the PBOC was scrambling to bail out the lender in order to avoid the inevitable liquidation avalanche that will begin as soon as the realization hits just how far China’s non-existent collateral is stretched out.

 

From the FT:

Officials from the government of Fenghua, a town in eastern China with a population of about 500,000, the People’s Bank of China and China Construction Bank, which was the main lender to the developer, were on Tuesday thrashing out ways to repay the company’s Rmb3.5bn ($566m) of debt.

 

Not surprisingly, local government officials were keen to downplay Xingrun’s fate, which quickly added fuel to jittery markets after Chaori defaulted previously. The “situation is not that serious yet”, said a Fenghua local government official to the FT who only gave her surname Wu. Failure of a small property developer is not unusual in China or even in Zhejiang Province, where Xingrun is based. Well, it is if people start asking questions.

 

One can see why the local governments and administrators are eager to downplay the potential impact. As Bloomberg reported overnight, “some 66 percent of new Chinese developer dollar-denominated bonds sold this year are trading below their issue price amid the collapse of a private real estate company and news the housing market is cooling.” In other words, the Chinese housing market is suddenly the perfect receptacle for a lit default match to lead to an all out panic.

 

About $6.3 billion of notes in the U.S. currency sold by property companies including Guangzhou R&F Properties Co., KWG Property Holding Ltd. and Shimao Property Holdings Ltd. (813) have fallen in secondary market trade, according to data compiled by Bloomberg. Prices on Kaisa Group Holdings Ltd. (1638)’s 2018 8.875 percent debentures dropped to a seven-month low yesterday while Shimao Property’s $600 million of 8.125 percent notes due 2021 and sold to investors at par in January were trading at 97.646 cents on the dollar.

 

Demand for developer debt is waning after government officials familiar with the matter said yesterday Zhejiang Xingrun Real Estate Co. doesn’t have enough cash to repay 3.5 billion yuan ($566 million) of debt. The value of home sales in the world’s second-biggest economy fell 5 percent in the first two months of the year after local governments stepped up measures to curb rising prices. The 7.5 percent economic expansion targeted by China this year would be the slowest since 1990.

 

We’re cautious on property bonds short term, with the developers expected to report weaker year-on-year monthly sales data for March,” said Owen Gallimore, a Singapore-based credit analyst at Australia & New Zealand Banking Group Ltd. “For the majority of high yield property developers, January and February sales fell as tier three and four cities suffered from over supply and the smaller developers faced a credit squeeze.”

 

In other words, not only is the primary market frozen, but the secondary market is crashing further adding to the reflexive fuel that could be precisely the catalyst that unwinds the entire Chinese credit bubble:

 

China Resources Land Ltd. was the last company from China and Hong Kong to sell dollar debentures in Asia, adding $50 million to its existing 4.375 percent bonds due February 2019 on March 13.

 

The collapse in secondary prices comes less than two weeks after Shanghai Chaori Solar Energy Science & Technology Co. became the first company in China to default on its onshore corporate bonds.

 

All of this is happening as China is doing all it can (and has been for the past two years, without success) to cool its red hot housing market bubble, which unlike the US where the bubble is in the stock market, in China it is all about housing:

 

At least 10 Chinese cities stepped up measures to cool local property markets at the end of last year with Shenzhen, Shanghai and Guangzhou raising the minimum down payments for second homes to 70 percent from 60 percent.

 

New-home price growth slowed last month led by Beijing, Shenzhen, Shanghai and Guangzhou, the four cities the government defines as first tier, the National Bureau of Statistics said today. Prices in Beijing and Shenzhen each rose 0.2 percent in February from a month earlier while they added 0.4 percent in Shanghai, the smallest increase since November 2012, and gained 0.5 percent in Guangzhou. Prices advanced in 57 of the 70 cities the government tracks, versus 62 in January.

 

Visually:

 

 

So all of the above would suggest the FT’s account of an imminent, if quiet, bailout of ZX is true. Turns out isn’t, and in fact the PBOC was so pissed it took to its Weibo microblog site to explain what really happened. As Bloomberg summarized, the Chinese central bank says it didn’t participate in an “emergency meeting held Tuesday” to discuss Zhejiang Xingrun Real Estate as reported by some unidentified media  according to a statement posted on PBOC’s official microblog account. PBOC is not involved in dealing with risks from the developer, according to the statement.

 

For the purists, here is the official statement via Weibo:

 

[Condemned individual foreign media untrue] March 18, individual foreign media reports, “China’s central bank to discuss emergency aid small real estate company,” inconsistent with the facts: First, the People’s Bank did not participate in the text referred to “convene an emergency meeting on Tuesday.” . Second, the People’s Bank of Zhejiang Xingrun not involved in the disposition of property-related risks. False reports to the media release behavior in unverified cases, the People’s Bank strongly condemned.

 

Well, it was google-translated, but the gist is clear.

 

So which is it: will China really let ZX fail and allow the second bond default in under a month to further slam the secondary bond (and much less relevant equity) market, while grinding the all important primary issuance market to a halt at precisely the time when credit creation in China is absolutely critical, or will the PBOC have been exposed as a liar once again.

 

Since the PBOC is merely a central bank, and thus lying is its bread and butter, our money is on the former, but one can only hope that in a world in which the Bernanke global put is now ubiquitous and perpetual, and the only investment calculus depends on the return/return analysis, that it will be “communist” China that finally allows risk back into the global investment equation.

 

And finally, putting it all into perspective, is our favorite chart showing bank asset creation in China and the US over the past five years. It needs no commentary.

 

 

Two Steps Forward, One Step Back — Paul Craig Roberts – PaulCraigRoberts.org

Two Steps Forward, One Step Back — Paul Craig Roberts – PaulCraigRoberts.org.

Two Steps Forward, One Step Back

Paul Craig Roberts

Washington’s plan to seize Ukraine and to evict Russia from its Black Sea naval base has come amiss. But as Lenin said, “two steps forward, one step back.”

Do you remember all the tough talk coming from John Kerry, the White House Fool, Hilary Clinton, and the lickspittle Merkel about the harsh sanctions that would “badly damage” the Russian economy unless Russia prevented the referendum vote in Crimea? Well, it was all bullshit, more hot air from the White House sock puppet and the lickspittle German chancellor who is a disgrace to the German nation. As the Russians kept telling John Kerry, sanctions on Russia would destroy Europe and do little damage to Russia.

I wish the Russians had kept this to themselves. I was looking forward to the Washington morons destroying NATO by closing down the European economy.

Of course, after pretending that they were macho tough guys, something that Washington’s presstitute media could hype as sanctions had to be imposed, so Washington came up with sanctions, not on Russia, but on eleven individuals: the deposed Ukrainian president, an advisor to the deposed president, 2 Crimean officials, and 7 Russians.

The choice of the officials is an utter mystery. The seven Russians are a Putin aid, a Putin adviser, four members of the Russian parliament (Duma) and a deputy prime minister. What any of these people had to do with the referendum in Crimea, no one knows.

Moreover, the sanctions only apply to foreign bank accounts that these 11 individuals might have outside Russia. Most likely, that means only the deposed Ukrainian president, if we are to believe all the propaganda about him. Other reports say that the sanctions are only for the next six months.

If the Washington and EU criminals steal any money from these persons, the Russian central bank can replenish their stolen accounts.

The people who decided that Crimea would disassociate from Ukraine and return to Russia were the people themselves. Under the wording of Obama’s stupid sanctions, his sanctions should apply to the Crimean people who voted to disassociate from the US stooge government in Kiev.

Additionally, Obama’s sanctions apply to himself and to his regime and to its NATO puppets as it was the West that overthrew the elected government of Ukraine, not Russia or Crimea. The Americans, of course, never apply law to themselves.

In other words, the sanctions are totally meaningless. Yet, the White House Fool declared: “If Russia continues to interfere in Ukraine, we stand ready to impose further sanctions.”

Obama’s hypocrisy makes a person want to puke. It is the White House Fool who is interfering in Ukraine. It was Washington that financed and organized the overthrow of the elected Ukraine government, using well organized and well armed neo-nazis to intimidate the unarmed police and ruling party, thus clearing the way for Washington to set up an unelected government of its well-paid stooges.

What the incompetent White House Fool overlooked is that southern and eastern Ukraine are Russian, not Ukrainian, so the fool’s coup has caused Crimea to depart and is causing widespread protests in eastern Ukraine against Washington’s stooge unelected government in Kiev. Washington’s stooge Kiev government has appointed unelected Ukrainian multibillionaire oligarchs, who have their own private security forces, as mayors of the Russian cities to put down the protests. If the oligarchs use violence against the Russian people, the likely result will be that the Russian Army will take control of eastern Ukraine, which in every essential way is Russian.

If eastern Ukraine returns to Russia, Washington will be left with the ultra-nationalists of western Ukraine, people who fought for Hitler during World War 2. The EU doesn’t want ultra-nationalists as the EU is busy stamping out nationalism and the sovereignty of European countries. Nevertheless, Washington will have gained a strategic advantage over Moscow, as Washington can place anti-ballistic missile and other military bases on western Ukraine’s border with Russia, thus completing Washington’s encirclement of Russia with hostile military and missile bases.

Russia will neutralize the US bases by targeting them with Iskander missiles, which cannot be intercepted by ABMs.

All that the White House Fool will have achieved is to further make clear to Russia, and to China, that Washington has both on its target list, because both are in the way of Washington’s world hegemony.

One can only wonder why Putin doesn’t preempt the coming US military attack on Russia by destroying NATO economically without firing a shot. All Putin needs to do is to cut Europe off from energy. It would take Washington three years to create the capability to deliver US natural gas, achieved by fracking’s destruction of US water supplies, to Europe. By that time NATO governments would likely have been overthrown by mass unemployment and economic suffering. Putin could also seize all foreign assets in Russia and rapidly complete the arrangements with China, India, Brazil, and South Africa to abandon the use of the US dollar in international settlements.

The US dollar as world reserve currency is the source of American imperialism. The five countries that comprise the BRICS have half of the world’s population. They can conduct their economic affairs without the dollar.

The world needs to understand that the neoconservative US government is the Third Reich on steroids. It is a malevolent force with no sense of justice or respect for truth, law, or human life. Just ask the residents of Iraq, Afghanistan, Libya, Syria, Palestine, Pakistan, Yemen, Somalia, Lebanon, Honduras, Venezuela, Cuba, Iran. Even the deluded western Ukrainians will soon catch on.

Obama himself declared that the US is “the exceptional nation.” This is the neoconservatives version of Hitler’s declaration that the German nation was exceptional and, therefore, above all others. The only difference between Washington and National Socialist Germany is that Washington has a far more powerful police state and nuclear weapons.

The hubris and arrogance that arises from Washington’s belief that it is the government of the “indispensable and exceptional nation” means Washington has no respect for any other country, nor for law whether its own or international. Washington can invade countries without cause, a war crime. Washington can kidnap and torture people, a crime under US and International law. Washington can ignore the self-determination of peoples, such as Crimeans. Who are mere Crimeans to vote on their own future without Washington’s consent, without Washington determining the outcome? Washington declares the Crimean people’s self-determination “illegitimate and illegal,” and refuses to recognize self-determination, while pretending to be the home of “freedom and democracy.”

No government in human history can come close to the hypocrisy and malevolence of Washington. Armed with nuclear weapons and a military doctrine of pre-emptive nuclear first strike, Washington alone stands as the threat to life on earth.

Ukraine Hikes Tensions Again, Says Russian Army Concentrated Near East Border For "Quick Invasion" | Zero Hedge

Ukraine Hikes Tensions Again, Says Russian Army Concentrated Near East Border For “Quick Invasion” | Zero Hedge.

On the heels of reports that:

  • *UKRAINE WON’T RECOGNIZE CRIMEA JOINING RUSSIA: INTERFAX

The Eastern Ukraine Kharkiv region’s governor Baluta warns:

  • *RUSSIAN ARMY CONCENTRATED NEAR ROADS FOR QUICK INVASION: BALUTA
  • *RUSSIA BOOSTS ARMY PRESENCE AT UKRAINE BORDER: KHARKIV GOVERNOR

And all of this after Putin confirmed that West’s sanctions are “irresponsible and aggressive and we will respond properly.”

Via Interfax:

Ukraine will not recognize the Autonomous Republic of Crimea’s and Sevastopol’s accession to the Russian Federation, nor will it recognize independence of the self-proclaimed Republic of Crimea, the Ukrainian Foreign Ministry said.

“We do not recognize and will never recognize either Crimea’s so-called independence or the so-called agreement on its accession to the Russian Federation,” Ukrainian Foreign Ministry spokesman Yevhen Perebyinis said at a news conference on Tuesday.

Ukraine Hikes Tensions Again, Says Russian Army Concentrated Near East Border For “Quick Invasion” | Zero Hedge

Ukraine Hikes Tensions Again, Says Russian Army Concentrated Near East Border For “Quick Invasion” | Zero Hedge.

On the heels of reports that:

  • *UKRAINE WON’T RECOGNIZE CRIMEA JOINING RUSSIA: INTERFAX

The Eastern Ukraine Kharkiv region’s governor Baluta warns:

  • *RUSSIAN ARMY CONCENTRATED NEAR ROADS FOR QUICK INVASION: BALUTA
  • *RUSSIA BOOSTS ARMY PRESENCE AT UKRAINE BORDER: KHARKIV GOVERNOR

And all of this after Putin confirmed that West’s sanctions are “irresponsible and aggressive and we will respond properly.”

Via Interfax:

Ukraine will not recognize the Autonomous Republic of Crimea’s and Sevastopol’s accession to the Russian Federation, nor will it recognize independence of the self-proclaimed Republic of Crimea, the Ukrainian Foreign Ministry said.

“We do not recognize and will never recognize either Crimea’s so-called independence or the so-called agreement on its accession to the Russian Federation,” Ukrainian Foreign Ministry spokesman Yevhen Perebyinis said at a news conference on Tuesday.

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