What’s Happening in Autumn? – Trustnodes

It’s gone get worse in autumn, a chorus of sorts keeps saying on the economy as doom seems to be everywhere while the economy is actually booming.

British GDP is back to near all time high for the first time in a decade. US is seeing growth at rates unheard of in decades prior to adjusting for inflation. China on the other hand is in big trouble.

We’ve been here before. Interest rates were rising in 2018, the worst year for many assets, and the year of the dollar.

Interest rates are again rising as is the dollar, but this doom talk is rising far more, with the ‘cost of living crisis’ repeated endlessly on corporate media as if the sky is falling when the public has never had it better where the economy is concerned.

Except in China. A tsunami has been going through their economy since 2019 when whispers first began of an increase in corporate debt defaults.

Instead of some sort of a blip, these defaults kept increasing in size, but the pandemic delayed much and put it on hold.

At least on the surface. That snowball had kept moving, taking down Evergrande and many others property developers in China.

Deaf, blind and aloof, authorities there saw, heard, and did nothing, except make it worse.

In an atmosphere already jittery, Xi Jinping and his administration went after Jack Ma, who was trying to increase sophistication in lending to slow the slowdown.

In seemingly the full grip of euphoric delusion, he went semi-fascist on entrepreneurs with interventions without due process, to the point investors began questioning whether property rights were even respected anymore.

All the while those corporate defaults kept piling up, with house prices now falling. In response, China’s central bank cut a key mortgage interest rate from 4.6% to 4.45%, again a non-action.

For the move is so small that it effectively amounts to no move at all, with this being the response of authorities there throughout, indicating they’re either in denial, incompetent, or they too expect worse and are holding off the bazooka for then.

Time For Bust?

A boom of four decades, the biggest and longest in history, is being challenged like never before.

Private sector debt levels in China have reached unseen proportions at 350% of the GDP, higher than even in the United States.

Government debt levels are lower, but they’ve just crossed 60%, around the same level as when the 2008 crisis hit the west.

Both the central bank and the government have plenty of room to move, but would it really have an effect is the question, as it didn’t in Japan or in the west.

If they got ahead of it, perhaps, but Xi has lost the confidence of the market, with it unclear how it returns while he remains head of state.

A flight of foreign investors is intensifying instead, with the EU Chamber of Commerce in Beijing stating:

“Twenty-three per cent of our members are now considering shifting current or planned investments out of China, the highest level on record. And 77 per cent report that China’s attractiveness as a future investment destination has decreased.”

Their US counterparts report the same, while Germany’s Chamber of Commerce found that nearly 30 per cent of foreign employees had plans to leave China.

Economic data coming from China are one after the other the worst in years, with it unclear whether a crash is fully on, or whether a full on crash is coming.

The rise in interest rates in addition may just sink them while they were already almost underwater as debt is becoming that more expensive, when it was already unaffordable as all those corporate defaults show.

The Rest

A full on economic crisis in China will affect the west, but it should be just temporarily as much of the investment that went there is re-directed to Europe and USA.

That may lead to a decade of stagnation in China while Europe and US move towards proper growth after coming out of a decade of stagnation in the tens.

A decade during which US GDP has grown, but only due to the tech sector primarily. While EU’s GDP has been flat.

Neither has seen much investment in infrastructure, while China has saturated their infrastructure investment.

America is now spending on upgrading their trains and roads, as well on some raw industries, and that can form the base for 4%-5% yearly growth.

Unbelievable numbers following last decade, but it used to be the norm before 2010, before China took off. A slowdown in China or a complete crash, may bring that norm back.

Just as they weren’t affected by 2008 therefore, Europe and America shouldn’t be affected by a crash there, if there is one, beyond the very short term.

In that current short term, stocks might be re-adjusting somewhat, and since worse is probably expected in China, worse is probably expected in stocks too.

2018

A rising dollar in 2018 also had stocks down with a finale in autumn. It may well be investors just see this as a repeat with stocks rising thereafter.

Bitcoin followed the same trajectory, and so rather than fundamentals, it may be more superstition suggesting it will get worse in September and October.

That also happens to be the same month when inflation is counted over 8% for last autumn.

If Jerome Powell, the chairman of Federal Reserve Banks, does do what he said, interest rates would have risen by another 1% by then, to above 2%.

After that, the market probably doesn’t care much anymore, and so the investments environment might be more optimistic.

All of which translates to, in our opinion, buy some now to try and front-run in case that’s what they’re doing while telling us to expect worse, while expecting to not be surprised if there is another -50%.

Then keep much to buy on Christmas day itself with the expectation of holding it for at least a year, but two or three, before expecting to see any returns.

Because one can easily interpret all this doom as bearish euphoria after eight weeks of red to give a bounce, but it may indeed get worse in autumn, especially if that snowball becomes a proper crash in China, so keep some ammo for then too.