Dow Jones Dips As White House Raises Recession Fears
What? WH + pundits are sounding recession pulling all indices down. Shouldn’t growth stocks would dive even more? How come growth stocks have been rallying while blue chips are declining?
What do people think about this Evergrande business? Potential for financial contagion?
Cathie said could be the canary so she is watching closely.
Puru said no issue.
I am clueless.
What I know many pundits are hedging or moving to cash (increase %).
If funding stress signs don’t emerge, don’t conclude that there is no contagion. Contagion is playing out already if you know where to look.
Some pundits suspect all those drastic actions by Xi is to get money from companies as government has run out of money.
Pettis is the best on this topic. Short twitter thread below.
Evergrande will get nationalized, and there won’t be any contagion large enough to rock the entire financial market. That means there won’t be any Lehman level collapse.
Chinese government controls all the banks and its capital market is closed. Xi can just order the banks to cease asking Evergrande for payments, and that would be it. Banks don’t need to mark down Evergrande’s papers in a hurry either because again, China controls everything.
All these debt bombs that didn’t go off are not harmless though. It just means it won’t be a 2008 style Big Bang. Instead it will be Japanese style lost decades. The debt still needs to be cleaned up. But it will be a slow death by a thousand cuts.
Trying to understand what is going on over there. This crackdown on Internet companies and gaming seems so haphazard. What is their master plan?
There is no economic rationale for any of the crackdown. It’s Xi’s personal political agenda.
Next year is Xi’s “election year”. That broke the norm set by Deng in the 80s, the last Supreme Leader of China. Even though he’s widely expected to get his 3rd term, Xi still needs to kinda convince the Party elites and society at large why he deserves another 5 years.
China’s development is at a bottleneck. Each dollar of GDP growth needs three dollars of debt to finance. Inequality is off the roof and birth rate has plummeted because raising a child is too darn expensive. Xi is selling a wholesale overhaul of society to address those problems. Crackdown on Internet companies is just a minor populist move. Many ordinary Chinese citizens actually like to see those high flyers fall back down on earth.
My bearish view on China and Xi in particular is that I don’t think he has the finesses to pull it off. True, many pressing problems, but Xi’s instinct is just Leninist commands from high above. Parents pushing their kids too hard? How about just cancel the entire tutoring industry? Kids play too much games? Ok, games are banned on weekdays and only three hours allowed on weekends.
Xi has the sophistication of a monkey banging a hammer. He solving problems will only make things worse.
Pettis’ arguments that there won’t be financial crisis is based on economic logic. China has the tools to prevent a crisis. But if Xi likes to have a financial crisis for political reasons? Then all bets are off.
In the end that sums up the reasons why I don’t invest in Chinese stocks. Political risks are just incalculable.
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Nvidia made global Top 10 biggest cap after Tencent shrank $388B because of you know who. 8 of the top 10 are American firms.
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I had never heard this stat before. It kind of says it all.
War is nature’s way of thinning population. The world will never be safe from wars, pandemics and natural disasters. Plan accordingly.
China is very complicated. The 100M or so people along the coast are living in the First World. This is the China we usually see in media. Gleaming high-rises in Shanghai and Shenzhen, well dressed people walking around with their iPhones. But there is also a rural China where 2/3 of Chinese live. There, only 10% of people graduate high school.
How China’s GDP Growth Fails To Measure Its Standard Of Living: The Tragedy Of The Current Recentralization
To …deliver a better standard of living for its people, China must revert to a more liberal package of economic and political reforms
Standard message regardless of the actual situation.
A good summary of the ever imploding Evergrande:
The correction has begun. There will be opportunities to buy soon. TQQQ anyone? 
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The debt crisis at Chinese company Evergrande alone is unlikely to trigger a massive selloff. But, there may be other factors not known to me that may come into play. So, when will it happen is unclear. But this week will be critical to watch.
Looks like nowhere to hide … Bitcoin tanks
Cryptos are untested assets. They have never been through the period of economic distress. If they come out unscathed through a crisis, they may cement their position as serious assetclass and can become a substitute for fiat currency/money.
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The China risk is real. RE companies aren’t going to be able to pay their debt. What happens next will be key. Will the government step in to protect banks and debt holders? If not, then banks will face giant write downs and bond holders will get crushed. If banks get crushed, it’ll spread to other industries at a very rapid rate. China’s debt levels would make 2008 seem like child’s play. Even if China just suffers from “lost decades” of no growth that would be devastating overall. Their spending and growth has been fueling WW growth.
I don’t think most people realize that for decades most growth has been from debt and not productivity gains. Eventually, debt service becomes so large that it’s impossible to borrow more money. At that point, there will be a big economic contraction. It was pushed out by continually lower interest rates changing the inflection point. Eventually, it will happen.
Not according to @manch favorite hedge fund manager, Cathie, is from innovation.
Implying next would be US?