The mysterious case of value destruction.

We are hearing large falls in housing prices in both Shanghai and Hong Kong, which have yet to be reported in the main stream media. 15% falls month on month in residential property as property developers dump available inventory to the market to meet cash flow needs.

In a deflationary phrase, no amount of interest rates cuts can save the market until confidence is restored, by which we think this is just the beginning to the year long turmoil China will face.

Will this be the start of the property market burst in Hong Kong?

When Greece owes EU 400B Euros of debt, it is Greece problem to repay the debt.

When Italy owes EU 2T Euros of debt, it is EU who have the problem of getting repaid.

Italy knows the game-play very well, with the outright challenge to EU ministers today. We seek for a resumption to the EU debt crisis from here. Easy play would be just to sell the Euro as ECB have no chance to raise rates or stop their bond buying purchase.

US Yields are spiking as the global bond bubble looks for signs of bursting, with bond managers down 800B just last week alone. We call this the mysterious case of value disappearance as both bonds and equities loses value.

Interesting to note the previous time when the 10 year bond yield rise above the 200 Simple Monthly Average was 1987.

As yields rise, forward PE valuations have to be further reassessed in an already overvalued US equity market.

The perfect storm is in place now for the global meltdown in both equities and bonds where there is now no place to hide from value destruction.

Good luck trading!