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The Wall Street Journal on China’s financial bubble in high-end sneakers.

  
  Analysis
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The Journal with a report “Chinese sneaker mania has gone into hyperdrive”

  • Speculators are flooding trading platforms and treating sneakers much like financial derivatives, including buying and selling shoe fractions
  • It’s all getting a bit much for the People’s Bank of China, whose Shanghai branch recently warned financial agencies in the city of sneaker-frenzy risk, including “mass disturbances,”
  • On trading platform Nice, a pair of Travis Scott Nike Air Force 1s is set to go on sale on Nov. 4 for around $170. Two buyers have already bought rights, similar to a call option, to buy the shoes for $1,553 and $2,667, respectively, and more than 2,000 users have said they are generally interested. More than 800 buyers are offering between $295 and $700 for a pair of Air Jordans set for release on Nov. 5 at $183.
Outstanding!

Is the China bubble about to burst?

  
Analysis, Economy, Education
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China bubbleAn aggressive and arrogant China is entering 2010 with a bit of uncertainty. Although there was no let-up in its exports in 2009, its internal financial position looks uncertain. China watchers are expecting a bubble that will eventually burst.

In 2009 banks in China lent internally about US$1.4 trillion to businesses, including the real estate industry, with dubious performance records. James Chanos, a successful U.S. stock market dealer, has predicted that China’s financial collapse could be far worse than Dubai’s.

China soothsayers wish to prove Chanos wrong – and they may be right. With US$2.2 trillion in foreign reserves, it would seem China could weather any storm. But the problem is that its cash reserves are uncashable. The United States and Europe are not just waiting to repatriate the money to China. So China could be left to its own devices if it faces a financial storm where markets tumble and poor people with money tied to investments see their savings vanish.

Easy credit, too much money in the economy, excessive foreign direct investment, a completely undervalued currency and rising real estate prices have definitely created a bubble. This bubble could burst with any minor international event. That is the price China would have to pay for designing policies that serve Western consumer markets. (more…)

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