eileen

and some people think tanning salons are having a rough time!

Jeff

Yes, I would agree with you Eileen the housing market is taking a serious dive also. Most agents I know are working other jobs now. We have ventures with an office of 200 + agents and know this from them.

parrot head

What happened yesterday is exactly why I'm out of the market almost entirely. I lost hundreds of thousands of dollars in the time right before and right after 911. If I live to be a hundred, I won't be able to use, completely, the losses on my taxes. I'm only limited to taking $3000 against ordinary income per year. It's still scary and unpredictable and I like to sleep at night.

tnannie

Oh I hear you parrot....my husband lost sooo much at the time of 911. Nothing in comparison to some, but it was terrible for us. :(

tennessee lee

you are all doomed!!!!! DOOOOOOOOOOOMED!!!!!!!!!!!!!

parrot head

O' no, not me. I now own a tanning salon and I'm laughing all the way to the bank.

MATT A

^^^

I saw the Brinks truck at his salon 3 times over a two day period.

billable

Maybe someone should call the NYSE and let them know how great the economy is...

__________________
Waiting list candidates 96,910
as of July 8 2007 at 4:23pm

MATT A

China had a sneeze yesterday which is what caused world markets to take a dive.

MATT A

China
When China's economy sneezes ...
By Macabe Keliher

HONG KONG - Not since the great tea surpluses of the late 19th century has China been able to command so much attention from the global economy for its faults. Just as too many leaves in Fujian in the 1880s sent world prices into a spiral, Chinese Premier Wen Jiabao shook the region's - and possibly the world's - financial markets to the core last week when he emphasized the government's determination to curb lending and said China would "take effective and very forceful measures" to reign in a booming and overheating economy.

Fearing a slowdown in a country that could arguably be driving much of the regional economy, investors sent Asia's financial markets and currencies into a tailspin. Taiwan - one of the most heavily China-leveraged markets - shed almost 8 percent after Wen's announcement last week, and Singapore was close behind, losing 5.75 percent. Currencies came crashing down too: the Korean won dropped 1.5 percent against the US dollar, and the New Taiwan dollar was down by almost a percentage point.

Even the US markets suffered heavy losses. The Dow fell 2.4 percent in the second half of last week, and the Standard and Poor's index fell 2.7 percent. Although US macroeconomic indicators were not glowing - lower-than-expected GDP (gross domestic product) growth, anticipated inflation, and expected interest-rate hikes - pundits have fingered China as a plausible cause.

Excess capacity flooding the world market could have disastrous effects on international trade prices. Further, in the past year China has taken in some 40-50 percent of Asia's exports, accounting for all of Taiwan's and the Philippine's export growth last year and more than 50 percent each of Japan's, Malaysia's, South Korea's and Australia's. Such intake has driven more than 7 percent of GDP growth in Taiwan, Malaysia and Singapore, 5.8 percent in South Korea and 4 percent in Thailand, according to Union Bank of Switzerland (UBS) figures (see Replacing US in Asian export market, February 11).

Should China sneeze, investors worry, the region might get very sick. "China has become very visible," says Chi Lo, a China strategist and consultant based in Hong Kong. "It has created a fear among investors; an expectation even if the actual material impact is not that great."

Applying the brakes
The Chinese government has moved cool down its red-hot economy. A 43 percent increase in investment in the first quarter this year, which helped fuel a near 10 percent GDP growth, led the People's Bank of China to raise the capital-adequacy ratio for banks a half a percentage point in April to 7.5 percent - the third time in six months.

Also, the China Banking Regulatory Commission announced this past weekend that commercial lenders have stopped the approval of new middle- and long-term loans. Last Friday the commission ordered the commercial banks to pull back loans extended to rush investment and copycat construction.

Furthermore, in March the government made a list of construction and building industries for which lending for new projects would be prohibited. Beijing also increased down payments for investments in steel manufacturing from 25 percent to 40 percent, and from 20 percent to 35 percent for cement, aluminum and real-estate investments.

Overheated
China's economy officially grew nearly 10 percent last year, although many foreign investment banks estimate the actual growth rate at 2 or 3 percentage points higher. Although the government took some measures late last year and early this year to cool the economy down, for all intents and purposes they failed. In the first quarter of 2004, China's economy officially grew 9.7 percent, and the Ministry of Commerce said first-half growth would certainly exceed 9 percent.

Investment growth this year has also skyrocketed: 43 percent year-on-year, its highest growth levels in recent times, and almost three times the 25-year average of 15 percent. In January and February, growth in 16 of 30 industrial sectors exceeded 100 percent. Investment growth in iron and steel, construction materials, and cement was as high as 170 percent.

But most troubling is the amount of "hot money" flowing into the country. On speculation that certain sectors such as real estate will boom, and that the yuan will revalue, foreign investors have pumped cash into China. In the first quarter of this year, the country got US$30.9 billion in outside foreign exchange, for an increase of 25.6 percent over last year. "If the surging inflows of international hot money continue, China's money supply and outstanding credit will keep expanding, resulting in the excess growth in a handful of industries, causing further economic bubbles and increasing financial risks," says Tung Chen-yuan, a political economist at the Institute for International Relations, Taipei.

The steel industry, for example, will have the capacity to produce at least 330 million tons of steel by next year, an amount the country will not consume until 2010.

Good timing?
Economists expect further curbs on lending for the overheated sectors, and possibly an interest-rate hike of a half a percentage point in the second half. Unlike the early 1990s when the government halted all new loans and recalled outstanding ones, authorities have chosen to be selective here and go after the culprit industries, the aim of which authorities hope will achieve a different result than the deflation that occurred then.

The problem this time, however, is China's prowess on the world market. For example, steel analysts estimate that if China's internal steel demand falls to that of four years ago, there will be enough excess capacity on the market to account for all of current international steel trade. This could cause a glut so rich that prices would plummet below costs and destroy manufacturers overseas.

But more so, if China stops importing at the same rate that it has been, will the region stumble and fall? Probably not. Analysts estimate that it will probably shave less than a half a percentage point off regional GDP growth. But tell that to regional investors.

Macabe Keliher is an independent historian and journalist, and a regular contributor to Asia Times Online. His website is www.macabe.net.

(Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)