What are the wild cards that traders need to keep in mind in the markets? We will discuss that and more in this issue!
This week in Market Slice, we take a look at a couple “wild cards” that the markets are unable to price efficiently: China and inflation. Since these are major questions that can have a profound impact on the markets, smart traders will want to pay close attention to the developments highlighted in this issue over the weeks and months to come.
The China Syndrome
Our younger readers may not remember – or never heard about – the 1979 movie about a nuclear meltdown, starring Jack Lemon, a very young-looking Michael Douglas, and the oh-so-serious Jane Fonda, as a TV reporter ferreting out the truth on an impending disaster.
The title of the film comes from the scientifically unsound notion that a reactor meltdown would lead to a radioactive mass so big it would burn all the way through the earth’s core to the other side of the planet… to China, so to speak.
While the idea may be flawed when it comes to nuclear power, there is a very real possibility of a reverse China syndrome unfolding in the near future.
Here’s what Three Founders commentator Jeffrey Tucker said recently:
We need to speak frankly about what’s happening to the global economy. It’s not just about supply chain breakages. Those can be repaired. It’s not just about inflation affecting every country. We are living amidst a fundamental upheaval of the whole world.
The biggest single danger to global prosperity now comes in the form of a devastating and deeply tragic wreckage of the country that was set to lead the world in finance and technology: China
The article is paywalled, but it’s a fascinating read. The gist of Mr. Tucker’s argument is that mismanagement in China, exacerbated by insane zero-COVID policies, threaten to spark a meltdown that could very well burn all the way through the global economy, with devastating effects for America.
Back in November we wrote about how China’s real estate debt crisis was likely to unfold slowly over an extended period. We even compared it to the early stages of the 2008 crisis, when warning signs of the impending collapse were evident, but widely ignored.
In the same way, the international investment community remains in blissful denial of the unavoidable long-term effects of this massive bubble.
Worse, few seem to realize that the game is up in China, and that the engine of world growth over the past decade is grinding to a halt.
The ramifications of China’s impending economic crisis are profound and far-reaching. Is your trading account prepared for the shocks a collapse in China will cause? Call (800) 883-0524 for your no-risk and speak with FFR Trading’s Strategy Team about how to protect yourself in a real downturn.
It’s easy now to laugh at Jerome Powell’s ludicrous assertions last summer that inflation would be transitory.
Or how only a few months before that, he was complaining about inflation being too low… how, try as he might, he couldn’t get inflation up above the 2% level, which he claimed would be optimal for growth.
By now, anyone who gives any credence at all to the declarations of Fed policymakers is either living under a rock, or on the payroll somehow.
So when the Chairman said earlier this month that “Nothing about [the economy] suggests that it’s close to or vulnerable to a recession,” we took it with a grain of salt.
Then, just one week later, he told reporters that “a soft landing is, is really just getting back to 2% inflation while keeping the labor market strong. And it’s quite challenging to accomplish that right now…”
How did we go from unable to get inflation over 2% to “quite challenging” to get it under 2% in the space of one year?
Anyone who buys groceries and gas or pays rent knows that inflation is out of control, and you don’t need a Ph.D. in economics to realize that – despite the “lying figures” that come out every week – our economy is structurally weak, and getting weaker.
Speaking of food, let’s check in with Gordon Long of Macro Analytics & Technical Analysis Strategic Investment Insights (matasii.com). He’s got a chilling take on what is happening as a result of worldwide fertilizer shortages
FERTILIZER FURTHERING FOOD INFLATION:
Cost push inflation can often be absorbed within the production distribution process before attempted to be passed on to cash strapped consumers. Food which starts with the farmer is decidedly different because of razor thin margins. Any cost to the farmer must be passed on or the farmer is immediately unprofitable. If the basic crop is rice, wheat or corn, it is a major problem because these food sources are a basic source of food for the poor. Wheat it is the source of the core ingredient four any kitchen – flour, the vast population survives on rice and corn is used in other food stuffs as well as animal feed.
Disruptions here have already had serious global ramifications but are now impacting American farmers and US food suppliers.
It’s not just fertilizer, either. The world now faces desperately low reserves of diesel fuel, which powers not only the farm machinery that produces the crops, but also the trucks which transport them.
This seems to weigh against Powell’s hope of recovery, or even a “soft landing” (read: mild recession). Here’s a take from Market Ear regarding the current outlook:
The center of the broader market debate: a large gap between growth and inflation expectations
Chart courtesy of themarketear.com
In other words, the professionals who make their living trading the markets expect inflation to continue higher, as growth slows down.
What does this mean for your trading in the markets? As stock prices continue to chop their way lower, a lot of traders are being chewed up and spit out. Are you prepared to profit whether equities move up or down? FFR Trading is here to help you put together a strategy that matches your investment goals. Call (800) 883-0524 for a no-risk portfolio evaluation, or simply go here to set a time for your appointment.
FFR Trading’s Strategy Team will help you figure out what all this means for your trading. Call (800) 883-0524 for a no-risk portfolio evaluation, or simply go here to set a time for your appointment.
The Davos World Order
One of the most popular books among business and financial commentators is Ray Dalio’s Principles for Dealing with the Changing World Order.
Dalio has earned major kudos for this encyclopedic treatment of the cycles of world history, in which he makes the case that we are at the end of a major cycle, and a time when U.S. world dominance is coming to an end.
And he makes a salient economic case — it is tough to find any thorough criticism of his work — although a handful of Amazon reviewers and writers on Medium have pointed out the book’s weaknesses.
And there definitely are a few problems with this massive tome – at 576 pages, it’s quite the read, and even the audio book took several hours to go through.
Here, then, are my biggest issues with the author’s inarguably well-informed perspective:
- Dalio’s ardent advocacy of Chinese supremacy in the “changing world order” borders on fanboy cheerleading. He’s so convinced that China will lead the world into the 21st century, and beyond, that he can’t see the flaws in his own reasoning. There’s no discussion on the Chinese real estate debt bubble, human rights violations, or that nation’s draconian response to the pandemic.
- Which, of course… why would there be? Dalio is a firm advocate of the World Economic Forum’s Great Reset agenda, and consequently a proponent of the end of the American “empire” and the advent of a new multi-polar world order – with China as a major pole! Thus he remains silent on the silencing of all opposition to the edicts of Xi Jinping, Bill Gates, Klaus Schwab and the Davos crowd. But this is not mentioned, either. We are left with the impression of Mr. Dalio as an impartial observer who is only looking out for our investment interests, rather than a very interested partisan of the globalist agenda.
- Nor is there any disclosure of Dalio’s substantial financial interest in the matters he’s discussing. His Hedge Fund, Bridgewater Associates, is one of the world’s largest with over $140 billion under management… and then there’s his personal investments. To present his commentary with no disclaimer of specific pecuniary interests seems a bit dishonest…exactly what does Ray Dalio stand to lose if the markets reject his analysis?
This is not to say Dalio’s a bad guy, or a shill for the New World Order… just that he might be!
The lesson is to read everything – even this newsletter! – with a critical mind and a discerning eye.
Finally, here are some words of wisdom from this grizzled veteran of 50 years of market wars:
“He who lives by the crystal ball will eat shattered glass.”
Thank you for joining us for this week’s issue of Market Slice! Visit our Instagram, Facebook, and Twitter for frequent updates on the markets, trading news, and investment inspiration! Good luck in the markets, everyone!