Mikey DOSEN'T Like it!!

China shying from shaky US mortgage market

By Olivia Chung

HONG KONG - While China is eager to invest a portion of its US$1.33 trillion foreign-exchange reserve overseas, it is unlikely to take a chance on buying additional US mortgage-backed securities (MBS) as they are now considered too risky, Chinese economists said.

During a recent trip to Beijing, US Department of Housing and Urban Development (HUD) Secretary Alphonso Jackson tried to sell China on the idea of buying more MBS. Investing in MBS Offers better returns for China than US Treasury bonds, and at the same level of risk, Jackson claimed.

[ Ya, good luck! Poor guy....]

...

However, it promises to be a tough sell for Jackson. The Chinese government may decline the offer given the current surge in mortgage defaults in the US, Chinese economists said. Moreover, China has invested most of its foreign reserve funds in US-dollar assets and wants to diversify its investment.

[I bet!]

...

Yi Xianrong, a senior economist and finance professor with the Chinese Academy of Social Sciences, a central government think-tank, attributed the previous surge of mortgage-backed securities bought by Chinese companies to inexperience in conducting risk assessments and their miscalculation of the US property market.

[He basically says here that the previous purchases of U.S. Mortgage Backed Securities were a mistake.]

...

Economist Shi Weigan echoed Yi's comments. "With a possible burst in the housing bubble in the US, it's not the right choice for Beijing to spend foreign-exchange reserve funds on the US mortgage-backed securities," Shi said.

[Thank you, but no thank you.]

Americans are so eager to buy Chinese crap, but the Chinese are not so eager to buy American crap. What does this tell Americans about the current status of the housing bubble? Wait for us to try to sweeten the pot.