But the second and biggest trigger I’ve been warning about is China’s unprecedented real estate bubble collapsing …
Recall the Japanese at the top of their stock and real estate bubble in 1989. They were buying real estate hand-over-fist, from Pebble Beach to Rockefeller Center to London. Then, after bidding them up, they ended up selling those holdings at big losses.
The Chinese make the Japanese look prudent!
Chinese buyers are bidding up the high end of the top coastal cities in English-speaking countries like they’ll never go down and like they can’t get enough.
We’re talking Sydney, Melbourne, Brisbane, Auckland, Singapore, San Francisco, L.A., Vancouver, Toronto, New York, London …
These markets are considered “Teflon-proof.” They’re not! In fact, they’re some of the greatest bubbles that exist today. China’s leading cities — like Shanghai, Beijing and Shenzhen — are up 700% or more since 2000!
Guess what happens when the bubble wealth in real estate that has built up in China finally collapses?
So does the capacity of the more affluent Chinese to buy real estate around the world. And these are the guys who have by-and-large been driving this global real estate bubble at the margin on the high end!
Bear in mind that Chinese real estate has been slowing and prices falling for over a year. That is precisely why China’s stock market bubbled up 160% in less than one year. When Chinese investors realized they could no longer make easy money in the real estate bubble, they turned to stocks. And after the dumb money piled in, the Shanghai Composite stock index fell 42% in just 2.5 months!
What did the Chinese government do? What any government in denial would do — buy its own stock market with hundreds of billions of dollars! That’s what the U.S. government did when its stock market crashed in late 1929. And sure enough, China’s stocks are following the same pattern to a tee: