November 17th, 2010

"The Chinese are treating apartments like Beanie Babies."

Jay Hancock explains how the Chinese housing bubble is different from the American one:
A Chinese housing bubble is not like an American housing bubble. The American bubble has popped. The Chinese one hasn't. Yet. Americans bought houses. The Chinese in Beijing and Shanghai buy apartments. Americans bought with no money down. Many Chinese still pay cash with no mortgage. American real estate was lived-in during the bubble and became vacant afterward. Hyperappreciated Chinese real estate, on the other hand, is already vacant. Nobody ever lived there, at least to a large degree.

More than half the apartments in Beijing and Shanghai may be unoccupied, China Daily reported last summer, citing figures from In Hainan it may be as high as 70 percent. The titles are clean. The mortgages are paid on time, when they exist. But nobody's home. And the owners wouldn't think of renting, says Patrick Chovanec, associate professor at Tsinghua University in Beijing. They don't want to mar their precious assets with people walking on the floors and opening and closing the doors.

Apartments seem to play the same role in modern China that gold often does in India -- a place to invest and store your money. Wealth is cascading into Beijing. But you can't invest it in the S&P 500; currency and capital controls prevent investments abroad. You could put it in bank and earn 2 percent, but Chinese inflation is perhaps 6 percent or 8 percent. Who wants to lose money doing that? So the Chinese sock their savings away in a nice flat, and since nobody wants a used apartment they don't allow anyone in the place.
In a comment, A. G. Sage sums it up in one sentence: "The Chinese are treating apartments like Beanie Babies."

Huh. So that's one of the ways Twitter makes money.

Felix Salmon posts:
I work for a global information company which makes billions of dollars a year selling valuable data to banks, hedge funds, and other people in the financial markets, often at very high prices: $2,000 a month or even more.

And then there’s Twitter, which jealously guards access to its full stream of tweets (roughly 1,000 per second, these days). As of now, however, it’s signed a deal with Gnip whereby you can get a randomly-selected 50% of those tweets for $360,000 a year, which works out at $30,000 a month. You’re not allowed to republish them, but that’s OK—the people willing to spend that kind of money are likely to be high-frequency trading shops who want to keep the data as private as possible in any case.

I don’t have a problem with Twitter monetizing my public tweets in this manner; as I understand it, DMs aren’t included, and neither are any tweets from protected accounts. But it’s quite astonishing how much those tweets are worth, when they’re aggregated into a fat pipe.

As Twitter shows, aggregated user data can be very valuable indeed. And with that kind of money on the table, there’s a lot of incentive to be ethically flexible.