Interesting that option pricing indicates an almost 50/50 at a hard landing, but the equities market seems to be much more optimistic. Additionally, shouldn't a 50-bps cut vs a 25-bps cut alarm investors more about the economy? My two cents is that the US market seems to be viewing every event as glass-half-full, which is understandable but dangerous given the strong equities' performance over the past 5Y.
Additionally, I'm sure you saw the PBoC "policy bazooka" that sent Chinese & HK indexes soaring. You previously mentioned a significant stimulus package was much needed. How do you view this introduced package? Could it be the inflection point in the economy, or did the market rally solely because of the national team's injection? Would love to get your opinion on this.
As always, thanks for doing this, it's always a pleasure to read.
Indeed, Tepper's view on China's attractive valuation and US's stretched valuation resonates with me a lot.
To play devil's advocate on this stimulus package:
During my trip back to Shenzhen this summer, I had conversations with a few people, from businessmen to taxi drivers. The overall sentiment, politically and economically, were extremely low. People talked about China shifting back towards a planned economy, and private enterprises were being suffocated by judicial pressures.
This stimulus package is a big step, but if the stimulus flows into inefficient state-owned companies, and consumer spending/confidence continues to be depressed, it feels the core issue would still remain.
Hopefully we see some change of tone toward private companies. Regardless, I might be hoping for too much too fast. Thanks.
Hi Bobby, yes, the equity market still has a high hope for a soft landing. But the narrative can easily change if the unemployment rate keeps going up. China stimulus package is positve; the surprise was the use of central bank money by financial institutions to buy stocks; that's quite aggressive. Regards,
Interesting that option pricing indicates an almost 50/50 at a hard landing, but the equities market seems to be much more optimistic. Additionally, shouldn't a 50-bps cut vs a 25-bps cut alarm investors more about the economy? My two cents is that the US market seems to be viewing every event as glass-half-full, which is understandable but dangerous given the strong equities' performance over the past 5Y.
Additionally, I'm sure you saw the PBoC "policy bazooka" that sent Chinese & HK indexes soaring. You previously mentioned a significant stimulus package was much needed. How do you view this introduced package? Could it be the inflection point in the economy, or did the market rally solely because of the national team's injection? Would love to get your opinion on this.
As always, thanks for doing this, it's always a pleasure to read.
worth watching... https://youtu.be/uGeyiFj-7D4?si=2nQ86BYd0LbZrtB9
Indeed, Tepper's view on China's attractive valuation and US's stretched valuation resonates with me a lot.
To play devil's advocate on this stimulus package:
During my trip back to Shenzhen this summer, I had conversations with a few people, from businessmen to taxi drivers. The overall sentiment, politically and economically, were extremely low. People talked about China shifting back towards a planned economy, and private enterprises were being suffocated by judicial pressures.
This stimulus package is a big step, but if the stimulus flows into inefficient state-owned companies, and consumer spending/confidence continues to be depressed, it feels the core issue would still remain.
Hopefully we see some change of tone toward private companies. Regardless, I might be hoping for too much too fast. Thanks.
Hi Bobby, yes, the equity market still has a high hope for a soft landing. But the narrative can easily change if the unemployment rate keeps going up. China stimulus package is positve; the surprise was the use of central bank money by financial institutions to buy stocks; that's quite aggressive. Regards,