Rogers, Hendry and Edwards fight it out

Jim Rogers, Hugh Hendry and Albert Edwards are three people I have a lot of respect for. So if the three disagree about a subject, that means we are in interesting but conflicting times. In this case Rogers claims there is no hard landing for China, contrary to Hendry and Edwards. I tend to side with Hendry and Edwards, based on anecdotic evidence from China, Singapore's GDP shrinking and Western economies doing badly.

Article from investmentweek:

Rogers: Why Hendry and Edwards are wrong on China
23 Jul 2012, Katie Holliday

Jim Rogers has dismissed fears of a hard landing in China, saying slowing growth is simply proof the authorities are managing the economy as they intended.

Rogers’ bullish views on China’s long-term economic prospects place him at odds with well-known China bears Hugh Hendry of Eclectica and SocGen’s Albert Edwards.

“Hugh has been dead wrong about China for three years now and China has not collapsed as he predicted, loudly, verbally and widely,” said Rogers.

“Albert has been bearish on everything for a long time. So if you are telling me he is bearish on China and bullish on everything else that would be different. But no, he is bearish on everything, including you, me and Mother Teresa.”

Hendry, who runs the CF Eclectica Absolute Macro fund, has refuted claims China will act as the main driver for global economic growth and is extremely bearish on Asia as a whole, while SocGen’s Edwards expects China to suffer an extreme hard landing which will prompt stocks to collapse.

China’s benchmark index hit its lowest level in three and a half years last week, and the region’s slowing growth continues to fuel investor concern. The Shanghai Composite index closed at 2,147 on Monday – its lowest level since March 2009 and 40% down on August 2009 highs of 3,471.

In March, Rogers told Investment Week he was banking on a sharp sell-off of Chinese shares as an opportunity to buy back in, and last week’s price falls have caught his attention.

“The lower they go, the more interested I become,” he said. A full blown share price collapse could be triggered by any kind of shock event, according to Rogers, from a bankruptcy in Spain, Italy or the UK, to rocketing inflation or a natural disaster.

Albert Edwards: incompetency of central banks

http://www.businessinsider.com/albert-edwards-conspiracy-theory-central-banks-created-the-housing-bubble-and-heres-why-2011-11

Societe Generale's Albert Edwards has a killer conspiracy theory for you.

For his latest Global Strategy Weekly note, Edwards decided to republish an article he first wrote in January 2010.  The title: Theft! Were the US & UK central banks complicit in robbing the middle classes?

As usual, Edwards' note is entertaining. And this particular one has a timeless quality, so we are sharing some of it with you.

Edwards was so shocked by what he considered to be incompetancy by U.S. and U.K. central banks that he was willing to consider their actions as parts of a grand conspiracy.

Mr Bernanke’s in-house Fed economists have found that the Fed wasn’t responsible for the boom which subsequently turned into the biggest bust since the 1930s. Are those the same Fed staffers whose research led Mr Bernanke to assert in Oct. 2005 that “there was no housing bubble to go bust”? The reasons for the US and the UK central banks inflating the bubble range from incompetence and negligence to just plain spinelessness. Let me propose an alternative thesis. Did the US and UK central banks collude with the politicians to ‘steal’ their nations’ income growth from the middle classes and hand it to the very rich?

If true, how did they get away with it with no one noticing?

...Indeed, it has been amazing how little political backlash there has been against the stagnation of ordinary people’s earnings in the US and UK. Did central banks, in creating housing bubbles, help distract middle class attention from this re-distributive policy by allowing them to keep consuming via equity extraction? The emergence of extreme inequality might never otherwise have been tolerated by the electorate.
........
I recalled seeing another article from John Plender on this topic back in April 2008. His explanation for why there had been so little backlash from the stagnation of ordinary people’s income at a time when the rich did so well was simple: “Rising asset prices, especially in the housing market, created a sense of increasing wealth regardless of income. Remortgaging homes over a long period of declining interest rates provided a convenient source of funds via equity withdrawal to finance increased consumption”

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So, what happens when the housing bubble bursts and people start to realize the income disparity?

Going forward, in the absence of a sustained housing boom, labour will fight back to take its proper (normal) share of the national cake, squeezing profits on a secular basis. For as Bill Gross pointed out back in PIMCO’s investment outlook ‘Enough is Enough’ of August 1997, “When the fruits of society’s labor become maldistributed, when the rich get richer and the middle and lower classes struggle to keep their heads above water as is clearly the case today, then the system ultimately breaks down.”. In Japan, low levels of inequality and inherent social cohesion prevented a social breakdown in this post-bubble debacle. With social inequality currently so very high in the US and the UK, it doesn’t take much to conclude that extreme inequality could strain the fabric of society far closer to breaking point.