We have been reporting Prem Watsa’s Fairfax Financial annual meeting for shareholders. Readers can find some prior coverage here, . Below are the slides from Watsa, including some his ‘famous comments’ about China’s ‘massive real estate bubble’, and his chart about the social media bubble.
Monstrous Real Estate & Construction Bubble in China
George Soros And The Human Uncertainty Principle
The division between academic economics and the way traders look at the market is deep. The efficient market hypothesis assumes that markets and valuations are always pushing towards an equilibrium, and evidence to the contrary gets pushed aside as fluctuations or statistical deviations. But the dot com bubble, the
- China built 50 Manhattans between 2008 and 2012
- China built 20 million housing units in 2012 compared to 2 million in the United States at its peak
- At the end of 2013 China had 60 million units under construction
- In many Chinese cities, the existing housing stock has been replicated and is empty
- Home ownership rates in China are estimated to be over 100% versus 65% in the United States
- Since 2009 the Chinese banks have grown by the equivalent of the entire United States banking system
- The shadow banking system in China is estimated by BoA to be $4.7 trillion or 51% of Chinese GDP
- Prior to the credit crisis, the U.S. had $4.5 trillion in asset-backed securities (31% of U.S. GDP)
- A combination of explosive growth and high interest rates has resulted in a massive carry trade where speculators borrow at low rates across the world and invest in China – when the capital flows reverse, watch out!
Full presentation below
2014 AGM Final Slides PDF for download